What happens when the price of eggs soars? People buy fewer eggs and start looking for substitutes. What would happen if, say, government set a $10 minimum price on a dozen eggs, higher than the usual price in stores these days? People would buy fewer eggs, yet producers would want to sell all the eggs they could. Some eggs would sit around unpurchased.

No one disputes the economics of price controls on eggs. (We can leave to another day discussion of legislative attempts to set de facto price limits on products.) But, somehow, when it comes to wages, we’re supposed to throw basic economics out the window and pretend that price controls don’t matter.

Obviously no one thinks that price controls never matter. If government set a minimum price of a dozen eggs at $1,000, no one would legally buy eggs, and the egg industry would be destroyed. Of course a black market in eggs would thrive in those circumstances. Likewise, if government set a minimum price for an hour of work at $1,000, no business would hire anyone, and the entire economy immediately would collapse (again, except for the black market).

So we’re talking about price controls within a range that affects an industry without destroying it. Which leads us to House Bill 1208, which seeks to mitigate the harms of minimum-wage laws especially in Denver and Boulder.

Denver restaurants are struggling

Ed Sealover reports, “Denver alone has seen 473 restaurants shutter in the past three years, leading to a loss of 21,000 jobs, largely because of the skyrocketing cost of doing business, said Democratic Reps. Alex Valdez and Steven Woodrow of the Mile High City, who are sponsoring HB 1208.”

Although real-estate and other costs also contribute to the problem, high labor costs are a big factor. According to the National Restaurant Association, labor costs generally make up around 35% of a restaurant’s total costs.

Costs are not the only problem, to be sure. Several restaurant owners wrote a letter to Mayor Mike Johnston complaining of bad traffic planning, city crime, public drug use, and homelessness. See the Gazette’s report.

Still, what restaurant owners can control, insofar as market conditions allow and the legislature permits, are their financial outlays. And that’s why a lot of restaurants want the relief of HB 1208.

The response by various activists has been nasty. As CPR reports, House leaders Julie McCluskie and Monica Duran complained about “a deeply disrespectful flyer targeting a member at the Capitol and [of] attacks on businesses who testified in support of legislation.” Sonia Riggs of the Colorado Restaurant Association said various restaurants have faced bullying on social media and harassing phone calls.

The need for 1208

The summary for HB 1208 describes the basic issue: “Current law allows a local government to establish local minimum wages in excess of the statewide minimum wage established in the state Constitution. A local government that enacts a minimum wage must provide a tip offset for tipped employees . . . [of] $3.02,” owing to constitutional language passed by voters in 2006. (This illustrates why the Constitution should be reserved for laying out basic principles of governance, not for micromanaging aspects of the economy.)

The bill requires local governments with a higher minimum wage to include a “tip offset” of the $3.02 plus “the amount by which the local minimum wage exceeds the state minimum wage.”

CPR explains how this works out: “Today, Denver’s overall minimum wage is $18.81, but the tip offset allows restaurants to pay servers . . . $15.79 per hour to tipped employees, no matter how much they’re getting in tips.” For example, if a waiter earns $10 per hour in tips, the combined hourly pay is $25.79.

Opponents of the bill complain that tipped wait staff now working could suffer an overall wage cut if the bill passes. Maybe. But it is wrong to consider only those currently working in the restaurant industry while ignoring those locked out of that industry by the artificially high labor costs. If some people earn relatively more working for restaurants now, it is only because others cannot find a restaurant job at all while consumers pay higher prices.

Repeal 2019 minimum wage law

Back in 2019, the legislature passed House Bill 1210, allowing local governments to impose a minimum wage higher than that of the state, which currently is $14.81. Denver politicians, partly in response to a housing affordability crunch created by Denver politicians through restrictive land-use rules, imposed a considerably higher minimum wage.

The legislature should pass HB 1208 if it’s not willing to pass more substantive reforms, although amended to cover all industries that involve tipping (see Joshua Sharf’s essay). Better yet though, the legislature should forget HB 1208 and repeal the 2019 provision. Moreover, the legislature should refer a measure adjusting the tip offset to the actual amount earned in tips. That’s in the short term.

In the long term, we should have a serious discussion about why politicians (or voters) think they should be able to micromanage labor contracts at all, especially given that most politicians are basically ignorant about how to run a business.

People have the right to freedom of association and freedom of contract. The proper role of government is to protect consent by acting against force, threats of force, and fraud. People seeking work generally do not otherwise need the help of politicians; they need the freedom to negotiate their terms of employment individually or, if they wish, as members of a union. The main thing politicians should do is resist the temptation to interfere.

Ari Armstrong writes regularly for Complete Colorado and is the author of books about Ayn Rand, Harry Potter, and classical liberalism. He can be reached at ari at ariarmstrong dot com.