A new report released today by the Oregon Center for Public Policy finds that the inflation adjustment provision included in Measure 25 is “the correct measure for Oregon’s farm workers.” Measure 25, approved by voters in November 2002, raised Oregon’s minimum wage by $0.40 on January 1, 2003, and will increase the wage in future years based on changes in the US Consumer Price Index for all urban consumers (US CPI-U).
Arguing that using “urban” inflation to adjust the minimum wage would be harmful to rural areas and the agriculture industry, the Oregon Farm Bureau Federation has introduced House Bill 2624, which would repeal the inflation adjustment provision.
The OCPP report, Urban Inflation for the Minimum Wage: The Correct Measure for Oregon’s Farm Workers, documents that most farm workers in Oregon work in urban areas. “Since more than 60 percent of farm workers are in urban areas, ‘urban’ inflation drives their cost of living,” said Jeff Thompson, economist with the OCPP and the report’s author. “Repeal of the inflation adjustment is in effect a wage cut for tens of thousands of workers in coming years.”.”
The report also documents that use of the nationwide price index in Measure 25, the US CPI-U, is “conservative.” Between 1992 and 2001 prices rose 26 percent under the inflation index used in Measure 25, but they rose 30 percent under the Portland-Salem area inflation measure.
“The price increases that will be reflected in Measure 25 will already be lower than the inflation most workers experience here in Oregon,” noted Thompson. “Lowering the inflation adjustment or eliminating it would mean that these low-paid workers will fall that much farther behind the cost of living.”
Thompson pointed out that there is no measure of rural inflation. “Relying on the national ‘urban’ inflation measure is the best we can do,” he said.
“Even if there was a measure of ‘rural’ inflation, it might not produce inflation lower than what is measured by the one used in Measure 25,” Thompson added.
The report shows that, while price increases in the US CPI-U trail those seen in the Portland-Salem area, they have risen at the same rate as found in small cities across the country. Nationally, prices in cities with populations under 50,000 have tended to rise at the same rate as in the average of all urban areas.
“Compared to other inflation indices, Measure 25’s is the most appropriate measure to adjust Oregon’s minimum wage,” said Thompson.
The Federal Bureau of Labor Statistics strongly advises use of the same inflation adjuster as Measure 25’s in local wage “escalator clauses” because it is the most reliable and least volatile source of consumer price inflation available.
The Oregon Center for Public Policy is a Silverton, Oregon-based non-profit research institute that uses research and analysis to advance policies and practices that improve the economic and social prospects of low- and moderate-income Oregonians, the majority of Oregonians.