Minimum Reasoning

Full disclosure first: I got laid off my job as a columnist at The Denver Post in June for reasons I still struggle to grasp. So when Rock Bottom Restaurants did the same to 36 employees at its Louisville headquarters in November, I paid close attention to the explanation.

When company officials placed blame on a voter-approved amendment that forces automatic increases in Colorado’s minimum wage, my interest grew.

Minimum wage hikes forcing job losses in corporate offices is an interesting and ironic proposition.

Rock Bottom’s chief financial officer, John Coletta, insists it happened. “There is no doubt that there was a direct correlation in minimum wage increases and the layoffs,” he says. Coletta called the November 2006 ballot initiative that approved minimum wage increases for tipped and regular minimum wage employees, “too much, too soon. …In 2007, we took a 12 percent bite in operating cash flow just from (the rising minimum wage).”

Tipped employees’ pay went from a minimum of $2.13 an hour in 2006 to $3.83 an hour in 2007. Non-tipped employees’ pay went from $5.15 to $6.85 an hour. Coletta says the tipped employees at Rock Bottom’s Old Chicago, Rock Bottom Brewery, ChopHouse, Walnut Brewery and Sing Sing restaurants didn’t need the raise. “Our average tipped employee makes $16 an hour,” he explains. Raising pay for those receiving tips raises expenses while doing little to help those at the bottom of the pay scale, the CFO maintains.

“This doesn’t do much to change poverty,” Coletta says.

His suggestion that laid-off corporate employees owe their fate in part to the company’s lowest paid employees pits workers against each other. Meanwhile, managers making exponentially more than the waitstaff, busboys and dishwashers hold themselves harmless.

If you do that, you better have proof.

I can’t find any.

With all the talk about how well tipped employees have it and how the increases gnaw disastrously into Rock Bottom’s bottom line, you’d expect the company to mention it to the state Department of Labor and Employment.

Here’s what labor department spokesman Bill Thoennes reports:

I asked (the layoff assistance team) if we had recently assisted in restaurants that were implementing layoffs and, if so, if Colorado’s increase in the minimum wage was ever cited. The only restaurant we have assisted…was Rock Bottom Brewery. However, that was mostly at the corporate level and the minimum wage was not cited in their paperwork as a cause of the job cuts.

Nothing here indicates that…the increase in the minimum wage has affected staffing.

No one is saying that Rock Bottom hasn’t been a good corporate citizen.

Rock Bottom did craft severance packages with a minimum of six weeks’ pay for the employees let go, more for those with three years’ tenure.

The problem is, with the country headed into a recession, it will take months, not weeks, to find decent jobs.

I know that the Colorado Restaurant Association’s Pete Meersman claims “the annual increase in the Colorado minimum wage has led to layoffs of employees, schedule cuts, reductions of employee benefits, price increases and other operational changes.”

But the restaurant association represents the interests of restaurant owners. It predicted economic gloom and doom from the first suggestion that minimum-wage workers deserved more.

Talk is cheap—not as cheap as $2.13 an hour—but still cheap.

“I haven’t heard anyone else attribute layoffs to the minimum wage,” says Gary Horvath, managing director of the Business Research Division at the Leeds School of Business at the University of Colorado.

That’s not to say it couldn’t, “Let’s say I have $10,000 budgeted for wages,” Horvath explains. “With higher hourly rates, I have fewer hours my people can work if I want to stay within my budget.”

Still, at some point, this theory must meet practice.

Horvath says two things seem to be creating more economic problems than the minimum wage: “I’ve heard about slowing markets and rising energy costs,” says the specialist who tracks Colorado’s economy.

While we talk, Horvath checks his data: Turns out, Colorado added 5,900 jobs in the food service industry in 2007, up from 5,200 new food service jobs in 2006, the year the minimum wage amendment passed. The Colorado Business Research Division projects that job growth in the food service industry will slow to 3,100 new jobs in 2008.
But no independent source of data is talking about a net loss of food service jobs, much less blaming it on mandatory hikes in the minimum wage.