The lowest-paid workers in Denver are getting a 9% pay raise on Jan. 1. When it takes effect, the city’s minimum wage of $17.29 will be one of the highest in the nation — higher than Los Angeles, San Francisco, Washington, D.C., New York City and Chicago.
But more on the minimum in a bit.
The Colorado Secretary of State’s office this week shared the latest quarterly update on how small businesses in the state are doing. It’s mixed, Secretary of State Jena Griswold said. Job growth remains strong, but the number of businesses that are delinquent in filing regular reports or repaying a debt rose.
“And while many new entities are filing with our office, the report also notes an uptick in delinquencies and dissolutions as well as signs of pessimism from the business community due to inflation, supply-chain disruption, worker shortages and interest rates among other factors that continued to place pressure on small business owners,”Griswold said during a news conference.
According to data provided by the Leeds School of Business at University of Colorado, the number of new business filings was slightly negative from a year ago, at -0.2% in the second quarter, which was the first annual decline since the start of the pandemic.
And the number of companies showing signs of failure grew at double digit rates — delinquent filings were up 9.8% while companies that dissolved their business grew 27%.
Brian Lewandowski, executive director of Leeds’ Business Research Division, speculated that more businesses would have dissolved earlier if it hadn’t been for federal stimulus packages that provided financial aid to small businesses, like the popular Paycheck Protection Programs.
“Perhaps the rise in dissolutions and delinquencies are a sign of some of that strain on businesses now that the stimulus has gone away,” he said. “With a slowing national economy, can we expect to see the rise in business failures over the coming quarters?”
His colleague Richard Wobbekind thinks so. Even though bankruptcy filings fell in the pandemic, recent data lags.
“I think there’s a fair amount of concern that we’re going to see bankruptcy and those kinds of things uptick over the next two quarters,” Wobbekind said. “Some of the funding that was out there has run out. We’re hearing this from the banking community and elsewhere.”
The nation’s gross domestic product slowed in the first half of the year, which can indicate an economy in recession. Nevertheless, strong job numbers and a growth in the number of businesses in good standing are evidence that Colorado’s economy is holding steady.
“Our view is that this is not, we’re not in a recession,” Wobbekind said. “Despite the slowdown in the first half, expectations are that the 2022 overall GDP will be positive. Right now, the forward-looking forecast for the third quarter is running at about one-and-half percent for GDP growth. But this is still obviously a much more moderate growth economy than we had in 2021.”
→ $1 to register a new business: Speaking of business filings, Colorado’s Business Fee Relief Act went into effect July 1. That dropped the cost of registering a new business from $50 to $1. In the first month, the state attracted 13,000 new business registrations and 4,200 trade names, which the Secretary of State’s office estimated a $750,000 savings for small business owners. >> Where to file
Why Denver’s minimum wage is going to $17.29 an hour
Next year, Denver joins a growing number of cities and states that have pegged their minimum wage to the Consumer Price Index. Essentially, that’s the inflation rate so when it goes up, wages go up.
And boy did the inflation rate go up this year, especially in the Denver metro area, which went above 9% in March. The spike in prices of consumer items from gas to groceries was something Americans hadn’t seen since the 1980s. That rate has already declined a bit.
But that first six months of this year became the measurement that the city of Denver used to calculate the 2023 minimum wage. This is required by a city ordinance passed in 2019 that was intended to help the lowest earners reach a more stable income. It took three years to raise the minimum wage to $15.87, from $11.10 in 2019. Minimum wage workers next year will see a $1.42/hour pay increase to $17.29..
And from here on, the city’s minimum wage will increase if the annual change in CPI increases.
Some local business leaders who opposed the increase said companies are dealing with higher costs themselves, a labor shortage and pandemic recovery.
The Denver Metro Chamber of Commerce would prefer that the government butt out.
“At its worst, increased prices lead to a general increase in cost of living that might be so high as to negate any advantage gained by workers having slightly higher wages. More importantly, some businesses struggling with costs may not be able to meet these new wage demands and will be forced to lay people off, increasing unemployment,” a statement provided by the Chamber reads. “Competition, free from government interference, is still the best solution for both workers and for employers.”
It’s unclear how many Denver businesses even pay minimum wage since the ongoing labor shortage has forced many employers to pay much more, from McDonald’s to Charter Communications.
According to Ryan Gedney, an economist at the state’s Department of Labor and Employment, some “very rough” estimates from the Occupational Employment and Wage Estimates program, released in April, show that the Denver metro area had 147,000 people making $14.25 an hour or less last year. That would include people outside of Denver proper, where the Colorado minimum wage was $12.32 last year (it’s now $12.56). And for those who are curious, the federal minimum is $7.25 an hour, which is the default minimum our neighbors in Utah, Wyoming, Kansas and Oklahoma use.
When the new wage kicks in for Denver in January, a full-time minimum wage worker would earn $35,963 a year, which even some at the Denver Chamber says is not enough. Prosper CO program, which the Chamber created to explore why employers couldn’t find enough workers, found that one reason was because the economy wasn’t working for lower wage earners. They concluded $45,000 was the “scrape-by” wage, and that was based on pre-pandemic data.
“We know this will put additional burdens on our local businesses, but this is an important tool to support vulnerable workers across the city,” Denver Mayor Michael B. Hancock said in a statement about the minimum wage increase.
I’ll be exploring minimum wage more next week so if you’re a Denver business already juggling higher bills, or you’re a worker who could really use the pay raise, please share your story at email@example.com.
→ Inflation eased in July: The U.S. Consumer Price Index didn’t change in July, according to the Bureau of Labor Statistics, but prices for all items were up 8.5% from a year ago before seasonal adjustment. Gas prices fell 7.7% from June but are still up 44% from last year. The inflation update for the Denver area is expected to be released this month. >> WSJ, BLS report
→ Gas prices fall below $4, but not in Colorado. The AAA gas prices tracker had the cost for an average gallon of regular gas on Friday at $4.054 in Colorado, or about eight cents higher than the nation’s $3.978. It’s lower in some parts of the state though, including Greeley, which averaged $3.813 and Pueblo, at $3.749 a gallon. >> AAA gas prices
Colorado manages to make all sorts of lists. My inbox is cluttered with them. And often, we’re at the top. Typically, it’s from a company seeking some publicity. But some are amusing, a little bit informative and, well, something to talk about. A few that arrived this week:
- 1st for home equity loans: Colorado’s homeowners averaged loans of $128,482, ranking first nationwide in a report by LendingTree. The state beat out second-place Hawaii and Connecticut in third place. What Coloradans spent the loan on wasn’t part of the survey, but loans had an average 5.22% interest rate and monthly repayment of $552. >> LendingTree report
- Investing in vacation rentals: Maybe this is where the home equity loans are going: conversion into a vacation rental. Colorado was “one of the top” regions in Airbnb’s recent report looking at new hosts who were renting out their homes to vacationing strangers. For the most part, newcomers joined to offset their own homeownership bills. “In fact, this trend was felt acutely in Colorado, which was one of the top regions in the U.S. that experienced this simultaneous increase in local mortgage payments and earnings by new hosts,” said Ian Martin, an Airbnb spokesman. >> Airbnb host growth
- 10th for credit card debt: Personal finance site ranked Colorado 10th highest for credit card debt — with the median credit card balance of $2,646. Maybe that’s where the home equity loans are going? >> Credit card debt by state
- 29th for burnout: Workers in Colorado can take the drudgery of a job five days longer than the rest of the nation, according to a survey of 4,031 workers by MyBioSource, a biotechnical products distribution company. Colorado’s peak burnout date is July 15, compared to July 10 for the nation. That means workplace stress that can turn into anxiety and depression grows higher during the hot days of summer when vacations tend to be common. Recovery strategies? Take micro breaks, set work-life boundaries, get rest and professional support if you need it, and talk about it. Perhaps colleagues will commiserate and work through it together. >> States burnout rank
Other working bits
→ More houses hit the market: Home sellers rushed to get their houses on the market before buyers petered out due to interest rate increases that resulted in higher monthly payments overnight. Here’s how it turned out, according to data from the Colorado Association of Realtors:
- Aurora: July inventory was up 30% from a year ago
- Colorado: Median prices also fell 1.3% from June to July to $580,000 but were up 10.5% from a year ago. Condo prices dropped 5.1% to $411,395, which is still up 7.3% from a year ago.
- Colorado Springs: Active listings increased 91% in July while the number of properties sold dropped 23% from last year.
- Denver: Median prices fell 1.7% from June to July, but they’re still 10% higher than a year earlier, ending July at $635,000. Condo prices fell 7% during the month but were still up 6.8% from a year ago.
- Durango/La Plata counties: The number of single-family listings sold in July was seven units short of July 2019. But there’s still a lack of inventory, which keeps prices high.
- Mesa County, Grand Junction: Median prices are slightly down from June but are up 16.2% from a year ago, at $395,000.
- Pueblo: Median sales price was up 4.7% to $321,000 from June and up 14.5% year to date. But new listings and sales are down, 0.8% and 18.2% respectively.
>> Latest reports by county or region
→$10,000 grants available for education entrepreneurs: Founders in the education space are encouraged to apply for microgrants of up to $10,000 from the Daniels Fund and VELA Education Fund. There’s $750,000 available and it’s open to “everyday education entrepreneurs,” which includes students, parents, teachers and community leaders. The aim is to find new ways to help children learn. >> Details
→ Craig, Hayden get $8.5 million for economic development: The towns of Craig and Hayden received grants from the U.S. Secretary of Commerce to help support economic development in the northwest part of the state. Craig received $3.3 million to construct a park and river access along the Yampa River in a project expected to create 129 jobs and generate $16.3 million in private investment. Hayden is getting $5.2 million for road and water infrastructure to develop an industrial park. The project is expected to create 79 jobs and generate $12 million in private investment. >> Details
→ Aging while living at home: Denver-based Silvernest, which built the tech to help older adults securely share their empty-nester home, partnered with A Little Help, a nonprofit that connects volunteers to aging residents who need some help with everyday tasks at home. “This program,” said Hilary Simmons, A Little Help’s executive director in a news release, “will make it easier for our members to continue to live in the communities they love with a helping hand from their neighbors and volunteers.” >> More info
Share your two cents on how the economy is keeping you down or helping you up at cosun.co/heyww. See you next week! ~tamara