Tuesday, October 13, 2009

Colorado Minimum Wage to Drop

As the consumer pricing index continues to fall, the State of Colorado will become the first state since 1938 to lower it's minimum wage.

The state Department of Labor and Employment ordered the wage down from $7.28 to $7.24. That's lower than the federal minimum wage of $7.25, so the de facto decline will be to the Fed minimum.

It will be the first decrease in any state since the federal minimum wage law was passed in 1938.

Note the year, 1938. As Bob Murphy pointed out in his book, The Politically Incorrect Guide to the Great Depression and the New Deal, an important reason that unemployment stayed so high during the Great Depression was because of government interference (such as minimum wage laws) which prevented wages from falling to levels that would have made it profitable for companies to hire more laborers.

I think minimum wage laws should be completely eliminated, but using Colorado logic, since housing prices in Colorado in have fallen by more than 30%, shouldn't the minimum wage in housing construction drop by 30%?

1 comment:

  1. That sounds pro-cyclical.

    Isn't that the reason Congress threatened the head of FASB earlier this year (in regard to pro-cyclical mark to market or fair value accounting rules)?

    Also, your proposal ties asset valuations to wages of people (likely with few assets).

    That said, it might start the revolution sooner.