Colorado is about to become the first state to lower its minimum wage. On Jan. 1, the wage will be reduced by 3 cents an hour to the federal minimum of $7.25.
The reduction will take place because the recession has driven down the cost of living. In 2006, when voters chose to tie Colorado's minimum wage to inflation, most assumed it would only increase wages. But advocates for the constitutional amendment knew the initiative could reduce or boost wages.
"The language saying we would adjust for inflation was done, pretty much, on purpose," says Rich Jones, director of policy and research at the Bell Policy Center in Denver. His group was part of a coalition that supported the 2006 initiative.
Jones says the initiative's opponents were worried about periods of hyperinflation that would push up wages without any sort of correction during periods when inflation declined.
Jones says that when the minimum wage was raised to $6.85 in 2007, supporters wanted "to be sure that that rate — over time — would still be able to buy the same amount of consumer goods and services."
For that reason, Jones says it's fair that the wage is going down now. But it's unlikely that the 50,000 to 70,000 Coloradans who Jones estimates are working for the minimum will see their wages reduced.
"I really couldn't see an employer dropping an employee 3 cents an hour," says Lorrie Ray, an attorney with the Mountain States Employers Council, a nonprofit organization that assists companies with employee relations. The savings would be minimal, and she says the downside of reducing wages could be significant.
"We're not going to be in a downturn forever," Ray says. "What you want are productive, happy employees. If you cheat them out of $1.20 a week [for a full-time worker], they may not stay around that long."