13 October 2009

We hate inflation AND deflation?

I was shocked to read that Colorado may act to reduce its minimum wage in the near future. Turns out they have a (good) law on the books that ties the minimum wage to the state's cost of living. But recessions mean deflation, and the cost of living in Colorado (and elsewhere) has declined slightly. So, while the prospect of reducing the minimum wage is jarring, it is also fair, at least insofar as the purchasing power of a minimum wage worker is maintained. (Of course, there are several countervailing factors: the rise in unemployment means fewer hours for many workers, and so gross incomes are already falling faster than deflation; also, people making more than the minimum wage are not, in general, having their wages garnished during the recession.)

This reminds me: when the USPS released the "Forever Stamp" in 2007, Slate noted that under a 2006 law, the cost of postage cannot increase at a rate exceeding the inflation rate. So, when the inflation rate is negative, doesn't this mean it's illegal for the cost of a stamp to stay the same, let alone to increase?

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