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Oregon Minimum Wage Set to Rise by 10 Cents

News Release
September 20, 2010 Download PDF

As number of poor rises, wage increase will cushion impact of gas tax increase

Today’s announced 10-cent increase to Oregon’s minimum wage starting next year is a welcome development for the state’s lowest-paid workers, according to the Oregon Center for Public Policy.

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Oregon Minimum Wage Set to Rise by 10 Cents (PDF)

Oregon’s minimum wage will rise from $8.40 to $8.50 on January 1, 2011, the Oregon Bureau of Labor and Industries announced today. The adjustment prescribed by Measure 25 — approved by voters in 2002 — reflects the increased cost of living over the past year as defined by the August Consumer Price Index (CPI).

“Oregonians voted to keep the minimum wage current with economic conditions, and the system is working as intended,” said OCPP analyst Steve Robinson. “The automatic annual adjustment gives employers a predictable, modest change. For workers, it avoids long periods when the minimum wage loses purchasing power between corrections by the voters or the legislature.”

The minimum wage increase will kick in just in time to help cushion the impact of a 6-cent per gallon rise in the gasoline tax. In 2009, the Oregon legislature scheduled the gas tax increase no later than January 1, 2011, and earlier if Oregon’s economy improved more quickly than expected. Because it did not, the gas tax increase — 25 percent over the current level — will take effect on the first of the year.

“Though the gas tax helps fund important improvements to our state’s transportation infrastructure, it takes a bigger bite out of the income of minimum wage workers, compared to better-paid workers,” said Robinson.

While the minimum wage boost will help some workers cope with the gas tax increase, it won’t be enough to pull all families out of poverty. A full-time minimum wage worker will earn $17,680 under the new wage. If such a worker is the sole breadwinner for a family of three, that family still falls below the federal poverty line.

The minimum wage would need to be greater than $8.80 to pull that three-person family out of poverty, Robinson said.

Poverty is on the rise nationally. The U.S. Census Bureau reported last week that the share of Americans living in poverty rose by a record amount to 14.3 percent, the highest rate in 15 years.

Unlike the nation as a whole, Oregon did not see a statistically significant change in its poverty rate, which came in at 12 percent for the 2008-09 period. Yet because of population growth, the total number of Oregonians living under the poverty line increased to an estimated 457,000, up from 402,000 in 1999-2000.

“Though Oregon’s minimum wage does not necessarily lift families out of poverty, our lowest-paid workers have a higher wage floor compared to those in just about every other state,” said Robinson.

With the increase announced today, Oregon will retain the nation’s second highest statewide minimum wage, trailing only the State of Washington. The neighbor to the north, which also pegs its minimum wage to the CPI, has an $8.55 minimum wage this year and will announce its annual inflation adjustment for 2011 later this fall.

“A strong minimum wage is good for the economy, because it puts money in the pockets of low-income workers. They tend to spend that money quickly and locally, and that helps maintain and create other jobs,” said Robinson.

He noted that studies of the federal minimum wage not only have found no adverse impact on job creation due to minimum wage raises, but that households with minimum wage earners increase their spending when the minimum wage goes up.

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. The Center’s goal is to improve decision making and generate more opportunities for all Oregonians.

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