There are few actions the Legislature can take that would be as good for Oregon’s working families and economy as boosting the minimum wage.
Right now too many Oregon working families don’t earn enough to make ends meet. Many jobs pay too little for families to cover basic necessities, let alone plan for the future.
Low wages not only harm workers and their children, they also drag down our economy. Low wages close the doors of economic opportunity for families. And as businesses know, cash-strapped workers are poor customers.
The Oregon Legislature has a historic opportunity to take our state in a new direction of increased economic opportunity for all workers. Gradually raising Oregon’s minimum wage to $15 per hour by 2018 would be a win-win for working families and our economy.
While at first blush the proposal to raise the minimum wage to $15 per hour seems unusually bold, it’s actually not unprecedented. In 1989, Oregon lawmakers phased in a minimum wage increase over two years. The increase lifted Oregon’s wage floor 42 percent by 1991.
That order of magnitude is essentially the same as what would occur under the current $15 minimum wage proposal during its first two years of the three-year phase-in. And it is greater than what would occur in the last two years of the three-year phase-in. In other words, there’s precedent for a gradual increase to $15.
Preliminary estimates show that about 589,000 workers would benefit directly from the increase. Some 114,000 additional workers also would likely see their wages increase indirectly as employers adjust all the lower rungs of their pay ladders. As a group, workers benefiting directly and indirectly from the increase would gain about $3.2 billion in additional wages during the three-year implementation period. That’s a lot of money being spent paycheck-to-paycheck.
A $15 per hour minimum wage also would improve the economic circumstances of many Oregon children. Some 350,000 children have at least one parent who would see more income, directly or indirectly, as a result of such an increase.
A higher minimum wage for parents can mean a lifetime of economic benefits for their children. For low-income children, increases in family income tend to lead to higher academic achievement and increased earnings when the children become adults. Raising the minimum wage would provide a better future for Oregon children and create a more solid foundation for our economy.
The impact of minimum wage increases on jobs is one of the most studied issues in economics. There is a great deal of research into what actually has happened when states have raised the minimum wage.
Based on the evidence, as opposed to conjecture based on economic models or theory, we can say that minimum wage increases have minimal impact — be it positive or negative — on jobs.
Understandably, the potential impact of a higher minimum wage on small businesses draws a great deal of attention. The concern, however, is misplaced.
The Oregon Center for Public Policy recently looked at how Oregon’s small business sector did following the three minimum wage increases enacted since 1989, including the 42 percent increase from 1989 to 1991. What we found was that the small business sector — in terms of both the number of establishments and the number of jobs — experienced mostly uninterrupted growth. Contractions were seemingly tied to recessions, not minimum wage increases.
What explains the fact that the small business sector seems unaffected by minimum wage increases? At least a couple of factors are possibly at play.
First is that a minimum wage increase puts more money in the pockets of low-income workers, who tend to spend it quickly and locally. They will spend it on clothes and school supplies for their kids, on a car repair, on an occasional meal outside the home, or just meeting basic needs. Thus, a minimum wage increase provides what small businesses need most: customers with money.
The second factor is well-established: a higher minimum wage yields savings to employers in the form of higher worker productivity, lower turnover and other efficiencies.
Oregon small businesses could benefit from a higher minimum wage, as could businesses of any size. Coupled with the increased economic security for about half-a-million Oregon workers and their families, a higher minimum wage is a win-win policy for Oregon. Our Legislature has done it before and should do it again.
Chuck Sheketoff is executive director of the Oregon Center for Public Policy, www.ocpp.org, an organization doing research to improve economic and social opportunities.