Testing
wage theory
Register-Guard Editorial
11/24/06
Oregon
voters launched an experiment in 2002 when they
approved an increase in the minimum wage, with
yearly adjustments for inflation. The state's
minimum wage of $7.50 an hour will increase to
$7.80 on Jan. 1, almost 50 percent higher than
the $5.15 per hour set by national law. For four
years, Oregon has tested the theory that minimum
wage increases result in job losses - particularly
if a lower-priced labor pool is available elsewhere.
So
far, Oregon continues to enjoy a robust rate of
employment growth, despite the widening gap between
the state and federal minimum wage rates. It may
be that job growth would have been stronger yet
if the state-federal gap were narrower. If that's
the case, Oregon can expect to benefit from action
in other states and at the federal level that
will mean larger paychecks for the lowest-paid
workers.
Oregon's
minimum wage is the nation's second-highest. At
some point, a wide disparity in minimum wage rates
might be expected to put Oregon at a disadvantage
in competition with other states for certain types
of businesses. Oregon does not appear to have
reached that point.
It's
possible that Oregon is partially shielded from
employment effects by the fact that its neighbors
also have high minimum wages. Washington state
has the country's highest - $7.63 an hour, which
will be adjusted upward on Jan. 1 to keep pace
with inflation. California's is $6.75 an hour,
and the rate in San Francisco is $8.50. High minimum
wages have not prevented the West Coast states
from having economies that are among the nation's
most vibrant.
If
a minimum wage disparity brings any sort of economic
penalty to Oregon, it will be softened soon. Voters
in six states- Arizona, Colorado, Missouri, Montana,
Nevada and Ohio - voted earlier this month to
raise their minimum wages. That brings to 29 the
number of states that have mandated minimum wages
that surpass the federal rate.
Many
of the state increases may soon by superseded
by an increase in the federal minimum wage. Congressional
Democrats have promised an increase, and the leading
proposal would raise the minimum wage to $7.25
an hour over the next two years.
Yet
the disparity will not vanish. None of the six
states raised their minimum wages to the level
of Oregon's; Colorado, for instance, increased
the lowest pay rate to $6.85 an hour, with an
offset of up to $3.02 per hour for workers who
receive tips. By the time the federal minimum
wage reaches $7.25 an hour, inflation adjustments
will have pushed Oregon's rate well above $8.
Even
so, it will be several years before the gap between
Oregon and other states is as wide as it is today.
And if Oregon's economy hasn't been damaged by
a state-federal gap of 50 percent, a smaller differential
should be even easier to bear.
One
explanation for the absence of economic consequences
may be that Oregon's minimum wage really isn't
that high - rather, the federal rate is exceptionally
low. The federal rate has not been increased since
1997, and its purchasing power has deteriorated
by 20 percent since then. The current federal
minimum wage is equal to 31 percent of the average
hourly wage of American workers, the smallest
percentage in 50 years. It's not that Oregon's
lowest-paid workers have surged ahead, but that
workers in other states have lagged behind.
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(C) Register Guard
http://www.registerguard.com/news/2006/11/24/ed.edit.minwage.1124.p1.php?section=opinion
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