Oregon
currently has the second-highest minimum wage in the nation, behind only
Washington State. That is due largely to the 2002 passage of Measure
25,
a Constitutional amendment that raised the wage and requires it to be increased
annually to adjust for inflation as it is measured by the Consumer Price Index
(CPI).
Since
then, Oregon’s minimum wage has increased, from the $6.90 per hour level set in
2002, to the current $9.25 per hour required by the CPI adjustments. Oregon’s present
minimum wage is approximately 22 cents lower than Washington’s.
Multiple
efforts are now underway to try and further boost the minimum wage in Oregon.
Some legislators have discussed the possibility of introducing
bills during the upcoming February 2016 session to achieve
that aim. Many similar proposals were introduced during the 2015 regular
session, but failed to pass before the Legislative Assembly adjourned last
July.
At
least
four
bills
sought to repeal the state preemption of local governments’ charter and
statutory authority to set minimum wage requirements. Around
half
a
dozen
other
bills
would have raised the wage in graduated steps over time. Still
another bill was aimed at raising the minimum wage to $10.75 per hour by
January 1, 2016.
Since
the end of the 2015 session, a pair of ballot measures has been filed to raise
the minimum wage to $13.50
per hour and $15
per hour. Regardless of whether the Legislature enacts a
minimum wage increase during the February session, these ballot measures will
be decided by voters in the November 2016 general election.
The
minimum wage question and the ballot measures are already
being debated in public forums. All indications are
that the issue is being framed as workers versus business.
This
perception is fueled by the use of the same sound-bytes employed for years by liberal
activists and interest groups that demonize job creators. With a complicit
media, they have managed to turn “free-market capitalism,” “corporation” and
“profits” into dirty words. They attempt to portray every business owner as
being too “greedy” to pay employees a fair wage commensurate with the value of
their labor.
Such
an approach, while arguably politically effective, fails to accurately take
into account the struggles and sacrifices made by Oregon small business owners.
I
worked for many years as a small business owner in Klamath Falls prior to my
career in the Legislature. That experience provided me with a very valuable
perspective on the affects that public policies can have on businesses’ bottom
lines.
Companies
of any size cannot absorb sustained losses and hope to remain in business. When
faced with increased costs, their four options are to increase the prices of
their goods or services to their customers, reduce their costs, limit their
profits or shutter their doors.
Any
increases in costs caused by public policies are particularly problematic
because they are not under the control of business management. Many industries
are limited in the prices they can charge, due to competition from larger
businesses, international competition and the willingness and ability of
consumers to pay additional money for goods and services.
Entire
sectors of our economy, including agriculture and forestry, are subject to prices
set through international and global markets. Such businesses often operate on
razor-thin margins, leaving entrepreneurs with few options with which to
address cost increases. Public policies that artificially increase production
costs make their goods and services uncompetitive and more difficult to sell.
What
many people fail to understand is that direct compensation to workers is only a
fraction of what businesses must pay in total employment costs.
My
office received an e-mail from a small business in Grants Pass in mid-September
expressing concerns regarding other payroll expenses. This business employs
about 30 people and has received multiple awards for excellent service.
This
business owner’s biggest problem is his company’s workers compensation
insurance rates are directly tied to wages. They are also tied to any bonuses,
commissions and gifts awarded to employees for good work. Put quite simply, an
increase in any form of employee pay automatically results in a significant
increase in the workers compensation insurance rates.
These
are not the only costs affected by a boost in wages. The contribution rates
that employers must pay towards Social Security and Medicare and unemployment
insurance are also computed as a percentage of employee compensation.
Moreover,
most successful employers pay their employees based on their ability,
productivity, education and seniority. Any sudden sharp increase in entry level
minimum wage results in a commensurate percentage increase for other employees.
A 40 percent increase in entry level wages will result in a 40 percent increase
in all employees’ compensation.
All
of those aggregated costs for a company with 30 employees adds up quickly and must
somehow be mitigated by the business, either by increasing prices for goods and
services, or by employing fewer people. If those increased costs cannot be mitigated,
business owners are left with scant options other than closing their doors,
resulting in all their employees losing their jobs. Another certain result is
less tax revenue with which to fund public services.
Politics
is often the art of identifying with the underdog, and proponents of higher
minimum wage get to claim that they’re “looking out for the little guy” and
fighting against “corporate greed.” Political candidates have a higher chance
of succeeding when they promise gifts to the public that must be paid for by
other folks.
It’s
much harder for job creators to raise objections to such suggestions without
appearing to be “the bad guy.” Nobody campaigns on giving people less, and even
fewer people are capable of winning an election based on such a premise. Given
these dynamics, it’s much more politically expedient to argue for a higher
minimum wage.
At
the end of the day, it’s hard not to sympathize with anyone who works a full
40-hour week and struggles to survive as the costs of maintaining a household
continue to soar. However, Oregon continues to be a national leader in poverty,
hunger, homelessness, food stamps, Medicaid and the use of other welfare
entitlements, despite having the second-highest minimum wage in the United
States.
The
abrupt raising of the minimum wage by as much as 50 percent will force many
businesses to either raise their prices, reduce their workforce or close. It will
not alleviate the crippling poverty that we see in this state. Any pay
increases resulting from a higher wage will immediately be canceled out by the
related higher costs for food, housing, energy and literally everything else.
Moreover,
people who presently qualify for limited public assistance would lose their
eligibility for many of those programs due to their higher earnings. These
employees may be forced to choose between continuing to work and quitting their
job in order to maintain eligibility for public assistance programs. They may
very well end up worse off than they are today.
These
are all important points to remember in the coming months as proponents for a
higher minimum wage continue their push legislatively and at the ballot box.
While the prospect of getting paid more for the same amount of work may seem
initially appealing to many, the consequences of what it will mean for Oregon’s
small businesses, and its people, cannot and should not be ignored.
Please remember, if we do not stand up for rural Oregon no one will
Best Regards, Doug
Senate District 28
Email: Sen.DougWhitsett@state.or.us I Phone: 503-986-1728 Address: 900 Court St NE, S-311, Salem, OR, 97301 Website: http://www.oregonlegislature.gov/whitsett
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