Colorado will become the first state to reduce its minimum wage because of a falling cost of living. The state Department of Labor and Employment ordered the wage down to $7.24 from $7.28. That's lower than the federal minimum wage of $7.25, so most minimum wage workers would lose only 3 cents an hour.Minimum wage laws discourage hiring. Moreover, proposals to make health care mandatory do the same thing.
Colorado is one of 10 states where the minimum wage is tied to inflation. The indexing is thought to protect low-wage workers from having flat wages as the cost of living goes up.
But because Colorado's provision allows wage declines, the minimum wage will drop because of a falling consumer price index. It will be the first decrease in any state since the federal minimum wage law was passed in 1938.
In Florida, deflation would reduce the minimum wage to $7.21, but the state's minimum wage already matches the federal wage, so Florida workers' paychecks won't change.
Other states with minimum wages that rise with inflation are Arizona, Missouri, Montana, Nevada, Oregon, Vermont and Washington.
Ben Hanna, Colorado organizer for the Association of Community Organizations for Reform Now, or ACORN, said the difference is small but significant for poor workers.
"I can't imagine many employers would see this as an opportunity to lower wages," Hanna said in August.
Small businesses, the lifeblood of any recovery, have significant reasons not to go on hiring sprees in this deflationary environment.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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