Avoid the recession, give your workers a raise.

A RECESSION IS COMING! A RECESSION IS COMING!

During any business cycle, any economist in the world can declare that a new recession will be coming down his or her nation's yellow brick road sometime in the future. It's when they pick the descriptor, near or far, that economists go wrong.

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For that reason, most economists never really describe the slowdown as imminent or distant. They just say that it's coming.

We've seen that in Colorado of late, and it is good reason for businesses, especially small businesses, which make up most of the Colorado business community, to begin taking a hard look at their operations to make sure they are lean enough to sustain a tightening of the national economy.

It's not a good reason, however, for businesses in Colorado to avoid sharing the wealth of their increased profits over the past two years with employees.

Median household income in Colorado, according to Census reports, has fallen 2.4 percent from last year, to $51,518 a year. And the poverty rate in the state rose, to 10.7 percent of the state's 4.5 million people, compared with 9.8 percent of the population two years ago, which was smaller.

The Denver Post, in a Labor Day editorial, cited an Economic Policy Institute study, "The State of Working America," to declare, "The analysis describes a period of wage stagnation for many middle- and lower-income families.

"Gains in productivity haven't translated into wage increases since 2000 because a weak job market hasn't forced employers to share the economy's growing revenues. The trend is made more notable by the fantastic leaps in compensation for business owners and executives at the top of the income ladder."

Now, I don't know where the Post got the idea that small-business owners were reaping the profits of the last two years worth of business growth in Colorado. From what I've heard, most small-business owners are just as deeply ensconced as wage earners in that middle-income demographic where median household incomes have fallen. A lot of them would benefit from a pay raise from their own companies as much as the worker in the next office down the hall.

But that really is my point. Colorado companies have been making money over the past few years, and they should be re-investing it in the people who have helped them make it, including themselves.

Everything, as it turns out, is of a piece. One of the economists who recently "predicted" a recession that could impact Colorado was Tucker Hart Adams, who in our September issue provided the anecdote that started a story, "Southwest Back Draft?" that analyzed Southwest Airlines' impact on the Colorado airline industry.

Adams, in her economic forecast for 2007, suggested that weakening home prices in the state would pressure consumers into cutting back on spending, which in turn would slow the entire state's economy. If business owners in the state prime that consumer pump with a little of the return their businesses have finally been making over the past couple of years, then any impact a national recession might have on Colorado will be assuaged to a greater degree than if owners do not share the wealth.

Everything is of a piece. Colorado middle-income and lower-income families are fighting a losing battle against the rising costs of living in the state. Business owners need to make sure their companies are lean enough to sustain a slowdown in business activity, and yet pay workers who will keep them productive during that slowdown enough to make life worth living in Colorado.

It's tough being in business, in Colorado or anywhere. But shouldering the responsibilities of being a business leader is part of the role and reward of being an entrepreneur.

ROBERT SCHWAB IS THE EDITOR OF ColoradoBiz. READ HIS WEB EXCLUSIVE COLUMN AND HIS POLITICAL NEWSLETTER, ACCORDING TO SCHWAB, AT COBIZMAG.COM, OR E-MAIL HIM AT [e-mail].