Seen from the outside, Mara Gross takes an order from customers during the breakfast rush at Sam’s No. 3 diner in downtown Denver on Aug. 28, 2024. (Photo by RJ Sangosti/The Denver Post)

Colorado’s cost of living — driven largely by the heavy burden of housing costs — is making the state less attractive to businesses generally. Or at least that is what CNBC suggests in its 2024 ranking of states based on their business climates.

Colorado fell to 16th among states this year, down from 11th in 2023 and fourth in the cable news network’s 2022 rankings. The category that hurt the state the most was its cost of living, where the network ranked Colorado 46th out of the 50 states; Colorado also ranked poorly, at 39th, for cost of doing business.

Rachel Beck is the executive director of the Colorado Competitive Council, an offshoot of the Denver Metro Chamber of Commerce that lobbies for policies that support a strong economy and good jobs in the state.

The organization’s leaders know housing is driving business costs in Colorado, Beck said, but she argues that putting pressure on small businesses by mandating higher wages is not a workable solution. Instead, the state and local governments need to focus on drastically increasing housing supply.

“Proponents of minimum wage increases are very well-intentioned because, theoretically, it’s a way to ensure people have enough money to live in a given location,” Beck said. “But the increase in cost of housing has far outpaced wages. And instead, you end up with unintended consequences, like restaurants struggling to stay in business.”

Rising housing costs also are among the first things cited by proponents of Denver’s strong minimum wage when emphasizing its importance.

Aderaw Belay, a baggage handler and wheelchair agent at Denver International Airport, holds jobs with two contractors there and often works 16 hours days, not including commuting time.

A member of the Service Employees International Union, Belay says the $18.29 per hour he makes thanks to the city’s minimum wage is not life-changing money — it’s money he needs simply to survive when a one-bedroom apartment costs $1,500 a month. Most of his coworkers at the airport have similar stories, getting by with two or three jobs.

“Right now,” he said, “we are thinking about basic life. We are thinking about basic needs.”

“Constantly a challenge just to break even”

Progressive policy advocates have praised Denver’s higher minimum wage. Last year, the Colorado Fiscal Institute cited data compiled by the Colorado Department of Labor and Employment in arguing that it didn’t hurt Denver’s economic performance relative to the rest of the state in the first three years.

“Opponents of local minimum wage policies claim that such laws cause businesses to cut jobs, cut hours and pass the higher costs to consumers in higher prices, which can result in fewer purchases,” CFI senior economist Chris Stiffler wrote in a blog post in July 2023. But in Denver, compared to other cities, “unemployment was lower, weekly earnings increased, and sales tax collections all outpaced the rest of Colorado.”

But restaurant owners and other small business owners have reported more difficulties.

At the Colorado Competitive Council, Beck says having rigid minimum wage laws that cut across industries doesn’t account for the conditions and circumstances in each industry. Anecdotally, she hears that restaurants, in particular, respond to the challenge by cutting hours.

That is the case for Sam Armatas, vice president of Sam’s No. 3 diner, a family business with two locations, one in Denver and one in Glendale. Michael Cobey delivers food to customers as he waits tables during the breakfast rush at Sam's No. 3 diner in downtown Denver on Aug. 28, 2024. (Photo by RJ Sangosti/The Denver Post)Michael Cobey delivers food to customers as he waits tables during the breakfast rush at Sam’s No. 3 diner in downtown Denver on Aug. 28, 2024. (Photo by RJ Sangosti/The Denver Post)