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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 07/12/2022 - CONSIDERATION OF A LOCAL MINIMUM WAGEDATE: STAFF: July 12, 2022 Ginny Sawyer, Policy and Project Manager WORK SESSION ITEM City Council SUBJECT FOR DISCUSSION Consideration of a Local Minimum Wage. EXECUTIVE SUMMARY The purpose of this item is to provide background and analysis on adoption of a local minimum wage and to clarify next steps. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. What additional information would be beneficial to Council? 2. Does council support bringing forward an ordinance for consideration on November 15, 2022? BACKGROUND / DISCUSSION Criteria to Set a Local Minimum Wage In 2019, the Colorado State legislature passed a bill allowing municip alities to adopt their own minimum wage and in 2021, Council adopted a priority to increase the local minimum wage. The state house bill limits the number of municipalities establishing a local minimum wage to 10-percent of all local governments in the state and requires those considering a local wage to engage with stakeholders including chambers of commerce, small and large businesses, businesses that employ tipped workers, workers, labor unions, and community groups and consult with surrounding local governments. The City is working to meet these criteria in the following ways: • Meeting with Fort Collins Chamber of Commerce • Meet with Latino Chamber of Commerce. • Utilizing the scheduled National Business Survey to incorporate questions on minimum w age. • Distributing and making available a general questionnaire for anyone interested in participating. (Reports pulled on July 6 and included in attachments.) • Sharing plans for minimum wage considerations through regional managers group. In survey and questionnaire questions, a wage of $15 was used to provide a benchmark for participants to gauge impacts. The bill also states that any local wage adjustment must take effect on the same date as the statewide adjustment and that if a local government adopts a wage that is higher than the statewide minimum wage the local government can only increase the local minimum wage each year by $1.75 or 15%, whichever is higher until the local wage reaches the amount enacted by the local government. Given these parameters and the $15 amount, Fort Collins could increase at the following rate: • 2023: $14.44 (15% of current $12.56 wage) • 2024: $15.00 July 12, 2022 Page 2 To date, Denver is the only local government to adopt a local minimum wage. The program began in 2020 and outlined the following adjustment schedule: • $12.85 from January 1, 2020 - December 31, 2020; • $14.77 from January 1, 2021 - December 31, 2021; • $15.87 from January 1, 2022 - December 31, 2022; and • On January 1st in subsequent years, the Minimum Wage will increase by the prior year’s increase in the regional consumer price index, if any. Denver’s program is administered out of the Denver Labor office which is part of the Auditor’s Office where they receive and investigate complaints. Detailed information on Denver’s program can be found at: <https://denvergov.org/Government/Agencies-Departments-Offices/Agencies-Departments-Offices- Directory/Auditors-Office/Denver-Labor> Without the addition of staff/resources, staff does not foresee immediate active enforcement capab ilities. Employees would be entitled and able to pursue legal action if they were not being paid the legal minimum wage. Local Data Analysis The City has also engaged Economic Planning Systems (EPS) to gather local employment and wage information. EPS findings overall include: • Existing research indicates that a higher local minimum wage generally does not lead to job losses or higher prices, but it does increase worker earnings and employee retention. • Approximately one-quarter of the Fort Collins workforce would benefit from a $15/hour minimum wage. • These jobs are primarily concentrated in the service sector - food service, retail, accommodations, personal care. More specific findings highlighted that a local minimum wage could have a small but pos itive impact on worker earnings, a minimal impact on employment levels, and a small increase in price in the restaurant sector. Research also shows that a higher minimum wage can reduce employee turnover and increase retention. Data also suggests a minor increase in business closures with a higher local minimum wage. In Larimer County, approximately 25% of earners are currently below $15/hour with most of these workers being in food service and personal care occupations. The overall average hourly wage i n Fort Collins is currently $29.67 /hour. Current State A state minimum wage was put in place in 2007 ($6.85/hour) and is adjusted every year starting January 1 based on cost-of-living as determined by the Consumer Price Index (CPI). July 12, 2022 Page 3 $5.15 $5.15 $5.15 $5.15 $5.15 $5.15 $5.15 $6.85 $7.02 $7.28 $7.24 $7.36 $7.64 $7.78 $8.00 $8.23 $8.31 $9.30 $10.20 $11.10 $12.00 $12.32 $12.56 $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Source: Economic & Planning Systems State Minimum Wage Implemented NEXT STEPS Staff has scheduled a first reading for local minimum wage consideration on November 15, 2022. This would allow time for a second reading and a January 1, 2023 implementation if desired. ATTACHMENTS 1. Employee Survey (PDF) 2. Employer Survey (PDF) 3. Survey Results - Other than Employees and Employers (PDF) 4. Powerpoint Presentation (PDF) ATTACHMENT 1 ATTACHMENT 2 ATTACHMENT 3 Local Minimum Wage Consideration July 12, 2022Ginny Sawyer, Project and Policy Manager ATTACHMENT 4 2Council Questions 1.What additional information would be beneficial to Council? 2.Does Council support bringing forward an ordinance for consideration on November 15,2022? 3Background HB19-1210 •Allows local governments to establish minimum wage laws. •Only 10% of Colorado municipalities allowed to adopt local wage. •Local wage must take effect on the same day as the statewide wage. •If wage is higher than the statewide minimum the local wage can only increase each year by $1.75 or 15%, whichever is higher until the local wage reaches the amount enacted by the local government. •Communities considering a local wage must: •Engage with stakeholders including chambers of commerce, small and large businesses, businesses that employ tipped workers, workers, labor unions, and community groups, and; •Consult with surrounding local governments. 4CityEfforts to Meet Criteria ·Meeting with Fort Collins Chamber of Commerce (Legislative group and focus group discussions underway.) ·Meet with Latino Chamber of Commerce. ·Utilizing the scheduled National Business Survey to incorporate questions on minimum wage. ·Distributing and making available a general questionnaire for anyone interested in participating. ·Sharing plans for minimum wage considerations through regional managers group. 5Program Implementation In Denver: program began in 2020 and outlined the following adjustment schedule: $12.85 from January 1, 2020 –December 31, 2020; $14.77 from January 1, 2021 –December 31, 2021; $15.87 from January 1, 2022 –December 31, 2022; and On January 1st in subsequent years, the Minimum Wage will increase by the prior year ’s increase in the regional consumer price index, if any. Denver ’s program is administered out of the Denver Labor office which is part of the Auditor ’s Office where they receive and investigate complaints. If Fort Collins chooses a $15 minimum wage: 2023: $14.44 (15% of current $12.56 wage) 2024: $15.00 Currently, no dedicated resource for enforcement.Employees would be entitled and able to pursue legal action if they were not being paid the legal minimum wage. Research MINIMUM WAGE ECONOMIC IMPACT STUDY Initial Data Analysis 7Research Context §In 2016, Colorado voters approved Amendment 70 to gradually raise minimum wage to $12.32/hour ($9.30/hour for tipped wage earners) §In 2019, the Colorado legislature passed HB19-1210 granting local governments the authority to adopt and enforce a local minimum wage Key Questions §What are the current employment and wage conditions in Fort Collins? §What are the potential economic impacts of a local minimum wage? §What are the potential costs and benefits of a local minimum wage? 8Research KEY FINDINGS Existing research indicates that a higher local minimum wage generally does not lead to job losses or higher prices, but it does increase worker earnings and employee retention. Approximately one-quarter of the Fort Collins workforce would benefit from a $15/hour minimum wage. These jobs are primarily concentrated in the service sector –food service, retail, accommodations, personal care. Minimum Wage History in Colorado •Current minimum wage is $12.56/hour ($9.54/hour for tipped employees) •State minimum wage is adjusted annually for cost-of-living increases, as measured by the CPI for Colorado •Currently, Denver is the only municipality in Colorado with a higher local minimum wage ($15.87/hour 9 $5.15 $5.15 $5.15 $5.15 $5.15 $5.15 $5.15 $6.85 $7.02 $7.28 $7.24 $7.36 $7.64 $7.78 $8.00 $8.23 $8.31 $9.30 $10.20 $11.10 $12.00 $12.32$12.56 $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Source: Economic & Planning Systems State Minimum Wage Implemented Communities with a Local Minimum Wage 10 Santa Rosa, CA: Currently at $15.85. Increased from original level of $12.00 in 2019. Future increases are pegged to the San Francisco metro CPI. Tucson, AZ: Currently at $13.00; will increase to $15.00 by 2025, then increases are pegged to the CPI-U for each year thereafter Flagstaff, AZ: Currently at $15.50. Increased from original level of $10.50 set in 2017. Future increases are pegged to the CPI-U Denver, CO: Currently at $15.87. Increased from original level of $12.85 in 2020; Future increases are pegged to the Denver metro CPI Minneapolis, MN: Currently at $13.50. Increased from original level of $10.25 set in 2018 and will increase to $15.00 by 2024. Future increases will be calculated by state Portland, ME: Currently at $13.00; will increase to $15.00 by 2024. After 2024, increases are pegged to the CPI-U Existing Research on Local Minimum Wage 11 Employment What is the impact of a higher minimum wage on employment? Earnings How does a higher minimum wage affect earnings for workers? Prices What is the impact of a higher minimum wage on prices? Employee Retention How does a higher minimum wage affect employee retention and job turnover? Business Closures How does a higher minimum wage affect the ability of businesses to stay open? Existing Research on Local Minimum Wage 12 •Evidence points to increases of a local minimum wage having a minimal impact on employment levels •Some negative effect on the rate of hiring for low- wage workers seeking a first job •Overall, increases have a minor but positive effect on worker earnings •A h igher minimum wage can be offset by reduction in hours •This is more likely to happen to less experienced workers •More experienced workers see greater increases in earnings •Research indicates that increases to minimum wage do not drive higher prices in most sectors, including grocery, gas, retail chains, drugstores •Evidence points to higher prices in restaurants, although the effect is small Employment Earnings Prices Existing Research on Local Minimum Wage 13 •Research generally finds that a higher local minimum wage reduces employee turnover and increases employee retention •Leads to improvements in job quality and worker attachment •Research suggests that higher local minimum wage lead to more business closures, but the effect is minor Employee Retention Business Closures/Exit Rates Wa ges vs. Prices, Fort Collins 14 Avg, Wage, Ft. Collins, 147% Housing Price Index, 204% All Prices, 130% Food, 131% Medical Care, 137% Transport, 122% 100% 120% 140% 160% 180% 200% 220% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 % of 2010 Source: BLS; FHFA;Economic & Planning Systems 15Wage Distribution, Larimer County (2021) 10% 25% 50% 75% 90% $13.83 $14.80 $22.66 $35.29 $48.84 Source: BLS OES; Economic & Planning Systems 10% of earners make more than $48.84 per hour 10% of earners make less than $13.83 per hour 16Wages by Occupation, Larimer County (2021) $14.15 $14.37 $17.16 $17.16 $17.47 $18.06 $18.44 $18.47 $23.02 $23.24 $23.37 $23.63 $23.86 $28.87 $29.95 $35.35 $36.05 $37.45 $45.84 $46.09 $58.40 $0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 Food Preparation and Serving Personal Care and Service Building and Grounds Cleaning and Maintenance Sales and Related Healthcare Support Transportation and Material Moving Production Office and Administrative Support Protective Service Construction and Extraction Installation, Maintenance, and Repair Arts, Design, Entertainment, Sports, and Media Community and Social Service Educational Instruction and Library Life, Physical, and Social Science Legal Occupations Business and Financial Operations Healthcare Practitioners Computer and Mathematical Occupations Architecture and Engineering Management Occupations Source: BLS OES; Economic & Planning Systems 17Major Low Wa ge Occupations, Larimer County De scription Hour ly Wage Em ployment unde r $15/hr Media n W age Below $15/Hour Fo od Preparation and Servi ng $14.15 7,675 Pers onal Care and Service $14.37 1,765 25th Percentile Wage Be low $15/Hour Sales and Related $14.01 4,568 Healthcare Support $14.27 1,630 Building and Grounds Cleaning $14.37 1,348 Trans portation and Material Moving $14.42 2,533 10th Percentile Wage below $15/Hour Ar ts , Entertainm ent, Sports , and Media $13.87 207 Prote ctive Servi ce Occupations $13.95 267 Offi ce and Adm inis tr ative Support $14.02 1,859 Production Occupations $14.16 717 Educational Ins truction and Library $14.34 927 In stallation,Ma intenance,and Repair $14.40 620 Sour ce: BLS OES ; Economic & Planning Sy stems Many low-wage occupations are in the service sector: Food Prep Personal Care Healthcare Support Sales Office support 18PreliminaryNational Business Survey Information 106 13 9 5 6 9 15 0 20 40 60 80 100 120 Ap proximately what percent, if any, of your employees earn less than $15/hr? None Under 10%10-24%25-49%50-74%75% or more Don't know 19PreliminaryNational Business Survey Information 45 38 16 54 6 0 10 20 30 40 50 60 To what extent do you support or oppose the minimum wage in Fort Collins increasing to $15 per hour? Strongly support Somewhat support Somewhat oppose Strongly oppose Don't know 20PreliminaryQuestionnaire Results 998 responses as of July 6 21PreliminaryQuestionnaire Results 22Next Steps •Continue survey and questionnaire analysis. •First reading for local minimum wage consideration on November 15, 2022. 23Council Questions 1.What additional information would be beneficial to Council? 2.Does Council support bringing forward an ordinance for consideration on November 15,2022?