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June 2, 1999

Oregon's Increasing Minimum Wage Brings Raises to Former Welfare Recipients and Other Low-Wage Workers Without Job Losses

by Jeff Thompson

Oregon's "highest in the nation" minimum wage continues to raise wages for former welfare recipients and other low-wage workers without harming their employment opportunities. Data through the first quarter of 1999 shows that the fully phased-in increase has reversed years of declining wages for welfare recipients and other low-wage workers.

The 1996 voter initiative increased the minimum wage from $4.75 per hour to $5.50 per hour on January 1, 1997, and to $6.00 on January 1, 1998. The final phase of the voter enacted minimum wage increase was implemented on January 1, 1999, raising the minimum to $6.50 per hour.

The study documents that:

• Oregon workers at the 10th and 15th percentiles of the wage distribution experienced increases in their wages, after adjusting for inflation, in the two years following the minimum wage increase. These workers' wages had fallen between 1994 and 1996, prior to the first minimum wage increase.

• Over 150,000 workers that had been earning less than $6.50 before 1999 have now been lifted up to and above the new minimum wage level.

• Real hourly starting wages for former welfare recipients rose to $7.23 in the first quarter of 1999, nearly a two percent increase over 1998, bringing the starting wage back up to pre-1994 levels.

• As many as one-half of the welfare recipients moving to work at the end of 1998 likely received a raise because of the 1999 minimum wage increase.

• The employment rate for young workers with low education levels grew faster than the rate for the workforce as a whole subsequent to the minimum wage increase.

The weight of the evidence shows that a rising minimum wage has been good for working families and good for Oregon. These increases demonstrate the value of the minimum wage in providing an effective floor to prop up low wages. Oregon's experience with the minimum wage provides a valuable lesson for policy makers in Oregon and throughout the nation.

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