Restaurants divided

Higher wages would boost payrolls, but some see benefits

David Milstead, Rocky Mountain News

Published October 24, 2006 at midnight

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To realize why the Colorado Restaurant Association is leading the fight against Amendment 42, do the math.

The proposal increases the state's minimum wage from $5.15 to $6.85 an hour, a 33 percent increase. But it also increases the minimum for tipped employees, such as restaurant servers, from $2.13 to $3.83 - an 80 percent increase.

Most servers make the bulk of their incomes from tips, with some estimates in the $10 to $15 an hour range. Servers at high-end restaurants easily can exceed $30 an hour.

"Almost no one pays their server more than $2.13 an hour," said local restaurant consultant John Imbergamo. "Servers' raises come naturally as inflation impacts menu prices."

It is the customers paying that raise, however. Restaurant owners say an increase that offers a mild boost to many servers' paychecks will instead hit their payroll hard.

"Their tipped salary goes up 80 percent, so it means those restaurants will see a huge increase in what they pay their tipped employees," said Jan Rigg, spokeswoman for Respect Colorado's Constitution, the Amendment 42 opposition campaign.

It explains why nearly three-quarters of the $641,135 raised by Respect Colorado's Constitution has come from Hospitality Issue PAC, a political-action committee housed at the Colorado Restaurant Association offices. The PAC contributed $212,800 in the two-week period that ended Oct. 11, records show.

The figures don't include contributions made by individual restaurants outside the association's PAC.

Colorado Restaurant Association representatives did not return calls for comment.

Amendment 42's backers include labor unions; 9to5, National Association of Working Women; and the left-leaning groups ACORN and the Colorado Progressive Coalition. They wanted the proposal on the ballot because they say they're tired of waiting for Congress to increase the minimum wage, which has been unchanged since 1997.

Because of the long-term effects of inflation, the minimum wage has less purchasing power than at nearly any point in decades.

"We believe it's important for everyone to see a little bit of an increase in their pay, including tipped employees," said Bill Vandenberg of the Colorado Progressive Coalition. "It comes down to the fact the cost of living has gone up, but the minimum wage has not."

A handful of restaurants agree. Amendment 42 backers are working on a list of endoresements from business and have 10 restaurants so far.

"Who can live on that wage?" asks Marilyn Megenity of Denver's Mercury Cafe, one of the 10. "I work closely with my co-workers, and I want them to have as high a quality of life as they can. I feed them organic food, and I do my best to pay them a living wage."

But many other restauranteurs look at their small profit margins, see the annual minimum wage increase that would be written into the constitution and wonder what will happen to their bottom lines as their payrolls increase every year.

"It doesn't belong in the constitution, and it doesn't belong with the (Consumer Price Index) increases," said Mark Valente of Valente's Italian Restaurant in Wheat Ridge. Valente's father started the restaurant 42 years ago.

"We don't have a lot of margin, but we have a lot of long-term employees, and we want to keep that."

Joe Madril, the managing parter of Cool River Steakhouse in Greenwoood Village, estimates about 40 percent to 45 percent of his workers are tipped employees. A similar number work in the back, cooking or washing dishes, and those employeees make $8.50 to $15 an hour.

"It's not just the labor I'm concerned about. It's the cost of the raw product," he said. "Prices of the goods delivered to us - the food, the supplies - will be going up as well. The immediate impact is we'll be looking at increased pricing."

Amendment 42

• Raises the minimum wage in Colorado to $6.85 from $5.15. Restaurant servers and other employees who receive tips would see an increase in their base pay to $3.83 from $2.13. The minimum wage then increases each year for inflation, "as measured by the Consumer Price Index used for Colorado," which will be the Denver-Boulder-Greeley CPI.

• Who supports it: Unions led by the AFL-CIO; 9to5 National Association of Working Women; the community groups ACORN and Colorado Progessive Coalition; and wealthy Coloradans Tim Gill, Pat Stryker, Jared Polis and Rutt Bridges.

• Who opposes it: Business groups including the Colorado Restaurant Association, the Denver Metro Chamber of Commerce and the Colorado Association of Commerce and Industry.

• Online extra: Do you support raising the minimum wage? Weigh in at www.RockyMountain News.com/business.

David Milstead is finance editor of the Rocky Mountain News. He can be reached at milstead@RockyMountainNews.com or 303-954-2648.

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