The Oregonian, Portland
The Oregon Legislature joined the minimum-wage debate in earnest this week (Feb. 1), taking public testimony on a proposal negotiated by Gov. Kate Brown that would, lawmakers hope, head off a pair of dramatic initiative petitions. The governor’s compromise, discussed Tuesday before a Senate committee, would raise the wage gradually to $13.25, and employers in and near Portland would be expected to pay $14.50 at full phase-in. This is certainly preferable to adopting a $15 statewide minimum within a few years, as would be required by one proposed initiative. But that’s where the good news ends.
The bad news is that it’s far from clear that Oregon’s minimum wage needs such a turbo-boost. At $9.25 per hour, Oregon’s minimum is already one of the nation’s highest — and it’s adjusted annually to account for rising consumer costs. This state may have some problems, but the minimum wage isn’t driving them. Perhaps that’s why the 2015 Legislature declined to raise it.
The Legislature’s urgency this month can be explained, at least partly, by the belief that Oregonians will end up supporting a mega-wage measure unless lawmakers produce something more modest. This could happen, to be sure. Then again, Brown and legislative leaders could opt to do nothing and simply tell their constituents the truth when wage activists plop a ginormous increase on November’s ballot. The groups that seek this increase, elected leaders could say, are gambling with the well-being of Oregon’s lowest-income residents.
Super-charging the minimum wage certainly will be good for some low-income Oregonians. But the change will have consequences, including higher labor costs for many employers, who will look for ways to mitigate them. They could do this by hiring fewer people, automating work where possible. They also could offset higher hourly wages by reducing other benefits or by raising prices. It’s fanciful to assume they’ll respond to what is, in effect, a hefty new tax on labor by shrugging their shoulders and saying, “oh, well.”
Meanwhile, parents who might be tempted to support even a $13.25 minimum wage should ask themselves the following question: If you were an employer, would you pay a 16-year-old with absolutely no job experience the hourly equivalent of $27,560 per year? Didn’t think so. Brown’s plan should be called the Teen Employment Destruction Act.
How employers respond to an increased minimum wage would depend on a number of variables and is a matter of intense debate. But Oregonians can be sure of one thing: Boosting the wage will increase employers’ incentive to shed costs somehow, and a state Employment Department report released this week acknowledges that the effects of large minimum-wage increases are untested. How reassuring.
If lawmakers were inclined to tell their constituents the unvarnished truth, they’d also explain that this year’s minimum-wage debate isn’t happening in a vacuum. Far from it, in fact. An 800-pound policy gorilla looms over this year’s session in the form of a massive corporate tax hike sought by the state’s public employee unions. The fact that Oregonians in November might vote on a $2.5 billion annual tax colors almost everything the Legislature touches this month — including the minimum wage.
The gross-receipts tax would apply to C corporations that do at least $25 million in Oregon business. There are about 1,000 such companies, the state estimates. Though the tax would apply to a relatively small number of companies, each of them does a lot of business in the state. To the degree that they could, they’d pass the new tax burden to customers, which could be individuals or other businesses — including those too small to qualify for taxation themselves. Thus would the gross receipts tax ripple through the state economy and raise costs here, there and everywhere.
Small businesses — those with fewer than 50 employees — rely disproportionately on low-wage workers, according to the state Employment Department. More than 30 percent of jobs provided by such businesses pay between $9.26 and $13.49 per hour. Taken together, then, policy changes designed to help low-paid workers and spare small businesses would conspire to harm both.
By whatever means policymakers seek to boost business costs, the price of goods and services inevitably will rise. Those affected will include minimum-wage workers as well as retired people with limited ability to adjust to higher prices. There’s little reason for lawmakers to dole out such pain — and hamper job creation in the process — in order to “fix” a minimum wage that already is among the nation’s highest.
If the governor and state lawmakers care deeply about low-income Oregonians, they’ll leave the minimum wage where it is and oppose — vigorously — any attempt to raise it further by initiative. They’ll be equally determined in their opposition to the unions’ corporate tax measure, even as they promise to spend the 2017 legislative session addressing the looming budget crisis created by the state’s public pension fund.
Minimum Wage in nearby states
Idaho: $7.25 (a bill to raise it faces tough opposition)
Montana: $8.05/$4 (depends on gross annual sales of business)
Nevada: $8.25/$7.25 (without health benefits/with)
Wyoming $5.15 (one of two states lower than the $7.25 federal rate)