New Year’s Day Minimum Wage Boost Helps Low-Wage Workers Without Hurting Economy

News Release
December 29, 2006 Download PDF

Oregon’s job growth since voters approved increase ranks 11th fastest

The 30-cent per hour cost-of-living adjustment to Oregon’s minimum wage set to take effect on New Year’s Day will help low-wage working families keep up with the cost of living without dampening job growth, according to an analysis by the Oregon Center for Public Policy (OCPP). The minimum wage will increase to $7.80 on January 1st under the state’s annual automatic adjustment.

According to the Silverton-based research institute, Oregon has added jobs more rapidly than 39 other states since the voter-approved minimum wage increase first took effect in January 2003.

“The annual cost-of-living adjustment in the state minimum wage is good for Oregon and good for Oregon’s low-wage, working families,” said Michael Leachman, policy analyst at the OCPP. “Oregon’s job growth has outpaced most other states since the minimum wage was first increased four years ago.”

Measure 25, adopted by voters in 2002, increased Oregon’s minimum wage to $6.90 on January 1, 2003 and established annual adjustments based on official cost-of-living calculations. On New Year’s Day, the annual adjustment will give full-time workers in Oregon an extra $52 a month they can use to meet their basic needs. At $7.80 per hour a full-time worker will gross $16,224 over the course of the year, or $1,352 a month in 2007, compared to $1,300 a month under the current law.

“Contrary to the doomsday predictions of minimum wage opponents, Oregon’s small annual cost-of-living adjustments in the minimum wage have been compatible with solid job growth,” said Leachman. When Oregon voters were considering Measure 25 in 2002, the Oregon Restaurant Association claimed that Oregon could lose 30,000 jobs. “The Restaurant Association overcooked their political arguments,” added Leachman.

According to the OCPP, Oregon added 137,700 jobs between the months of December 2002, the month before the minimum wage was first increased following voter approval of Measure 25, and November 2006. Oregon’s percentage growth in jobs over this period is the nation’s eleventh fastest.

OCPP analysis also indicates that restaurants have seen particularly rapid job growth since the passage of Measure 25. Restaurant jobs have increased by 13.5 percent since 2002 compared to an 8.0 percent gain for overall non-farm payroll employment. Restaurant industry lobbyists have been outspoken critics of the annual inflation adjustments in the minimum wage, and the industry has a large concentration of minimum wage workers.

Federal government data for jobs and hours worked in agriculture are available only for both Washington and Oregon, combined. Because both states have high minimum wages that adjust for inflation each year, the combined data is useful for evaluating the impact of high minimum wages on agricultural jobs. Washington’s minimum wage is $7.63 and will be going to $7.93 on January 1st.

Agricultural jobs in Oregon and Washington are up nearly one percent since 2002 over a period when agricultural jobs nationally have declined by 15 percent. Moreover, agricultural workers in Oregon and Washington have seen their average hours worked per week rise by 1.6 hours since 2002, more than double the increase nationally.

Federal government data on average hourly wages for agricultural workers are available for Oregon specifically. These data indicate that average hourly wages for agricultural workers in Oregon are up 0.8 percent above inflation since 2002. Wages for agricultural workers nationally are flat relative to inflation over the same time period.

“Despite complaints from farm and nursery operators, agricultural jobs in Oregon have performed well,” concluded Leachman. “The data on jobs, hours worked, and average hourly wages suggest that the minimum wage has been good for agricultural workers,” he added.

Leachman emphasized that the annual cost-of-living adjustments are important to Oregon’s working families who must cope with rising costs of health care, gas, housing, and other basic necessities. “Minimum wage workers may still be working for poverty wages to support their families,” he said, “but at least they won’t fall further behind in 2007 as their costs for basic necessities continue to escalate.”

Despite Oregon’s adjustments to the minimum wage, a full-time minimum wage employee supporting a family of three or more still does not earn enough to escape poverty. A full-time minimum wage worker in 2006 made just $15,600, which is $1,000 below the 2006 poverty line for a family of three. Because the poverty line, like Oregon’s minimum wage, is adjusted annually for inflation, a three-person family with one minimum wage worker will still remain in poverty in 2007. The poverty line for 2007 will be set early in the year by the federal government.

Leachman noted that the cost of covering “basic family needs” in Oregon is much higher than the poverty line suggests. A 2005 study by the Economic Policy Institute found that a parent with two children living in the Portland metro area would need $38,112, or over $18 per hour, to cover the necessary costs of a modest lifestyle.

The Oregon Center for Public Policy is a non-partisan research institute that does in-depth research and analysis on budget, tax, and economic issues.