What are the impacts of a local employment tax on the Boulder economy?

(Note: Occupations were selected to represent a variety of work categories
and the fields with significant number of employees in the Boulder area.)

Labor Costs in Boulder

As the proposed employment tax will raise labor costs for most activities in Boulder, a careful consideration of the true cost of labor was warranted. Consequently, this analysis looked at the breakdown of jobs within the community by occupational type, and compared wages rates with other competing communities. In general, Boulder firms pay a 10% premium for workers doing similar things in other communities. The wage premium may make economic sense if the Boulder worker is more productive than his/her peer in another community. As an example, if a computer software engineer in Boulder writes and edits 10% more code in an hour compared to a peer in Austin or Fort Collins, the firm will be able bill clients at a higher rate and still obtain comparable income and profits.

The charts provide several examples of the wage rates across these comparable communities.

While these differential wage rates may be paid to offset area residents for the higher costs of housing (which is significantly higher than the general 10% wage differential), the higher wage rates are not sustainable in the long term. In cases where the local cost of housing is extremely high due to unique community attributes and characteristics (places like Aspen and Telluride in Colorado or Cape Cod and Martha's Vineyard on the east coast), the premium paid for labor is passed onto local residents through the purchase price of goods and services. However, these communities do not have significant parts of their economy focused on nontourism or nonresort activities.

In the case of Boulder, high housing costs are contributing to high prices. The city's economy is exhibiting characteristics similar to business conditions of a resort community. The price for gasoline is observably higher in Boulder than other nearby communities, and this phenomena is true for other resident-oriented goods and services. At the same time, firms competing with other companies around the state, the nation, and the world for customer orders have to internalize the higher wage costs (if the productivity levels are not higher here).

This pattern is not economically sustainable for competitive firms located in Boulder, and employment taxes will further contribute to this nonsustainability condition. In the long term, this means that the Boulder economy will increasingly become, on the one hand, service-oriented, primarily serving local residents and visitors, and on the other hand, advanced research-based, with federalsponsored research and university research activities. Research centers and labs that produce unique sponsored research do not have competitors (the natural economic check and balance is replaced with Congressional oversight on costs). Firms starting to commercialize this research may initially locate in Boulder, but they would likely relocate to nearby communities as they grow and prosper in a cost competitive environment.