Minimum wage fight

Showdown over Amendment 42 centers on tying raises to Consumer Price Index

David Milstead, Rocky Mountain News

Published October 11, 2006 at midnight

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What if the minimum wage increased every year, adjusted for inflation?

It's not just a hypothetical - it's a key part of Amendment 42, the ballot issue this November that would raise the minimum wage to $6.85 from $5.15.

Each year thereafter, per the state constitution, the minimum wage "shall be adjusted annually for inflation, as measured by the Consumer Price Index used for Colorado," the measure states.

To proponents of the union- backed measure, the idea is simple. Rather than freeze the minimum wage in the constitution and have to go back to voters again years later to set another specific dollar amount in the constitution, the amendment contains a mechanism that allows the wage to increase automatically.

"We haven't been able to trust politicians to keep the minimum wage at a fair level, and without a constitutional amendment, we can't trust they won't cave in to pressure from well-funded business groups to repeal or reduce the minimum wage the citizens of Colorado vote on in November," said Linda Meric, national executive director of 9to5, National Association of Working Women.

But the idea of automatic increases, particularly that choice of tying it to inflation, provides opponents of the amendment some of their main arguments against the initiative.

"It's tied to a consumer price index for the annual increases to inflation that's centered in the Boulder-Denver area," said Eric Morgan, part of Respect Colorado's Constitution, the business-backed group campaigning against the intiative. "We don't think it's fair to impose that cost of living on the entire state. It's not fair to small-business owners in Wray or Pueblo or Grand Junction."

History of increases

The minimum wage dates back to 1938 and has evolved over time, gradually expanding to more job classifications. By 1978, the federal government established a single minimum wage of $2.65 for all workers covered by the law.

In the high-inflation days of the 1970s, the federal government bumped up the minimum wage nearly every year. But 1981, when the government set the wage at $3.35, saw the last of the regular increases.

Over the next 25 years, the government raised the minimum wage four times - two sets of two-year increases in 1990-91 and 1996-97. The $5.15 per hour established on Sept. 1, 1997, is still in force today.

Those moves have failed to keep pace with inflation, either at the national or local level.

If the federal government had put automatic, inflation-based increases in place in 1978, the national minimum wage would now be $8.54, according to a Rocky Mountain News analysis of federal wage and inflation data.

If Colorado had instituted Amendment 42 in 1978, using what was then the Denver-Boulder CPI, the minimum wage would stand at $9.64 today.

The Colorado number includes some astronomically high inflation: The Denver-Boulder CPI ranged from 11.2 percent to 15.5 percent each year from 1980 to 1982. It also includes some historic lows: Inflation was just 0.1 percent in 2004, and the Denver metro CPI was below 3 percent in five of the past seven years.

The lack of increase in the federal minimum wage has prompted states to take matters into their own hands. Now, according to the federal Bureau of Labor Statistics, 18 states have minimum wages above the federal level.

Turn off the 'autopilot'

Opponents of Amendment 42 criticize what they call the "autopilot" of Colorado's proposed measure.

"It's got less flexibility, it carves it in the constitution, it's got no ability to adjust when economic conditions change in the future," Morgan said.

The average Denver metro inflation over the past 41 years is 4.6 percent per year. Increase $6.85 by that rate each year over a decade and the minimum wage becomes $10.95 per hour.

The average from 1996 to 2005 - 2.6 percent - would increase the wage to $8.85 after a decade.

In criticizing what is now called the Denver-Boulder-Greeley CPI, Respect Colorado's Constitution has seized on an economic problem and seems to recognize the political advantage of highlighting it.

There is no such thing as a Colorado CPI - the federal government doesn't do statewide sampling of prices.

Proponents expect Amendment 42 to use the Denver-Boulder-Greeley CPI because it's what's used for both the Taxpayer's Bill of Rights and Amendment 23, the constitutional provision on education spending.

State policies don't use that, said Henry Sobanet, director of the Governor's Office of State Planning and Budgeting. "Many times we'll try to look for something commodity-specific - energy, food, health - depending on the issue."

Economists say the problems of using a metro-area inflation measure for statewide policy are real.

"The Denver-Boulder-Greeley CPI really represents that area and not the entire state," said Jacqueline Midkiff, an economist with the Bureau of Labor Statistics in Kansas City. "What we really would recommend is using the West Region CPI."

The West Region CPI covers 13 states, including high-priced California, Hawaii and Alaska, but it samples smaller cities - such as Provo, Utah - that don't have their own CPIs.

Stephan Weiler, a professor of economics at Colorado State University and a former Federal Reserve economist focusing on rural America, said Colorado "has an incredible varied rural landscape . . . it's difficult if you have a lot of different economies and one index."

The Colorado Legislative Council gathers cost-of-living data every two years to compile its School District Cost-of-Living Study. In doing so, council staff sample prices on a district-by-district basis. But the main goal of the study - which is not annual - is to compare prices across the state, not compare prices over time.

Amendment 42 proponents kept the CPI language vague, said Rich Jones of the Bell Policy Center, so that another statewide inflation measure can be used in the future if it's developed.

At a glance

• Amendment 42 would raise the Colorado minimum wage to $6.85 from $5.15 (to $3.83 from $2.13 for restaurant servers) and would mandate annual increases tied to inflation.

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