New Year Brings Good Tidings to Tens of Thousands of Low Wage Workers

News Release
December 28, 1998

State Employment Department and Small Business Association Studies Discussed

On New Year's Day, Oregon's minimum wage will jump 50 cents to $6.50 per hour, boosting the wages of tens of thousands of Oregonians, according to the Oregon Center for Public Policy, a Silverton, Oregon-based non-profit research group that analyzes state policies.

Voters enacted the minimum wage increase by initiative in 1996. The Oregon minimum wage increased from $4.75 per hour to $5.50 per hour on January 1, 1997, and to $6.00 on January 1, 1998. This is the third and final increase under the 1996 voter-enacted measure.

"While Oregon's minimum wage has not kept up with inflation over the long term, the new minimum wage will help low wage workers recover some of their lost purchasing power," said Charles Sheketoff, executive director of the Oregon Center for Public Policy. "The voter-enacted increase reversed a five year decline in the real value of the minimum wage."

A worker would have to earn $7.01 per hour in 1999 to match the purchasing power of the 1976 minimum wage ($2.30 per hour). "Despite the increase, the 1999 minimum wage earner will have less purchasing power than the 1976 minimum wage worker," said Sheketoff. When adjusted for inflation over the past 23 years, the $2.30 1976 minimum wage has a real wage value of $7.01 per hour in 1999 dollars.

The 1999 increase is smaller than the last two. In 1997 Oregon's minimum wage rose over 15 percent. It rose over nine percent in 1998. This final increase from the voter-approved measure will increase the minimum wage by slightly more than eight percent.

A new study by the Employment Department projects that approximately 195,000 Oregonians earn $6.50 or less and will directly benefit from the wage increase on January 1st.

"These 'rough' estimates by the Employment Department economists also note that the increase in the minimum wage can spill-over and affect the wages of workers who earn one or two dollars more than the minimum wage," said Sheketoff. "The 186,800 or so Oregonians who earn less than $9 an hour and more than $6.50 an hour may also benefit from this increase."

Even though Oregon's economy began to slow as the first of three minimum wage increases went into effect, state economists at the Employment Department do not believe the minimum wage caused the slowdown. "The Employment Department has noted that when the minimum wage increased from $4.75 to $5.50 and $6.00, the prevailing wage rates for entry level workers throughout most of Oregon were already equal to or higher than the minimum wage," said Sheketoff.

Employment Department economists conclude in their study that the first two minimum wage increases "appear to have had little or no adverse employment effect on the state's economy, and may have boosted the incomes of many low wage workers."

"The Employment Department's findings are consistent with previous reports from the small business community," said Sheketoff.

A study by the National Federation of Independent Businesses of Oregon (NFIB), demonstrated that over half of NFIB's members – 53 percent – were already paying $6.50 or more per hour as starting wages as of early 1998," said Sheketoff. The NFIB/Oregon study was released in a press release dated March 9, 1998.

"Oregon's continuing economic slowdown in 1999 will make it more difficult for businesses to contend with the upcoming increase," said Sheketoff. He cautioned, however that "we should not believe those who are quick to blame the minimum wage for layoffs, price increases, benefit cuts and the like in 1999." He noted "there's more to the story of business problems than just the minimum wage. The minimum wage is not causing Oregon's slowdown."

Again Sheketoff pointed to the NFIB study. "Fewer than half of NFIB's members who responded to an NFIB survey – 42 percent – reported that they had to raise prices (26 %), lay-off workers (13%) or cut benefits (5%) as a result of the first two increases in the minimum wage," said Sheketoff.

Sheketoff pointed out that the increase in the minimum wage will help thousands afford the education and training necessary to escape low-wage employment. "A recent U.S. Census Bureau report confirmed that education is the key to leaving low wage jobs," said Sheketoff. The Census Bureau reported earlier this month that in 1997 adults age 18 and over with a bachelors degree earned an average of $40,478 a year, while those with only a high school diploma earned $22,895.

The Employment Department economists noted that housing and the costs of Oregon's community colleges and universities "have skyrocketed during the 1990s." The Employment Department economists concluded, if the minimum wage increases make education or vocational training more affordable, "that, in itself, would be a worthy accomplishment."

"Those who would roll-back or deny some the minimum wage increase are limiting the ability of thousands of Oregonians to move up and out of minimum wage jobs," added Sheketoff.

The Oregon Center for Public Policy is a Silverton-based nonpartisan research group that analyzes budget and tax issues and government programs, and their impacts on low to moderate income Oregonians. The Employment Department's study appears in the December, 1998, issue of Oregon Labor Trends.

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