LOS ANGELES (Reuters) - Labor officials in the U.S. state of Colorado have proposed lowering the state’s minimum wage starting January 1, 2010 to track a decrease in the cost of living, highlighting the potential impact of falling prices on the economy.
Colorado is one of 10 U.S. states that indexes its minimum wage to annual fluctuations in cost of living or inflation.
Economists warn that deflation — or a sustained period of falling prices — is a bigger risk to the U.S. economy over the next six months than inflation, with the Federal Reserve keeping interest rates low and consumer spending still weak.
They fear that falling prices could spawn a vicious cycle and hobble an economy emerging from the worst recession since the Great Depression.
The proposal, which will be reviewed at a November 6 hearing in Denver, would adjust the $7.28 hourly wage to $7.24 per hour or $4.22 for tipped employees, the state’s Department of Labor and Employment said. The move would bring the Colorado wage below the federal minimum wage of $7.25 per hour.
“It appears somewhat inevitable that the minimum wage would be adjusted downward. We don’t want to say it’s a done deal,” Bill Thoennes, spokesman for the Department, said on Tuesday.
A provision in the Colorado constitution requires the state’s minimum wage to be adjusted annually for inflation, according to U.S. Consumer Price Index measurements in the Denver-Boulder-Greeley area.
Other states whose minimum wages are adjusted annually to track inflation include Arizona, Florida, Missouri, Montana, Nevada, Ohio, Oregon, Vermont and Washington.
Reporting by Gina Keating; Editing by Jan Dahinten