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Wage hike could backfire on the poor

Oregon legislators pushing for a $15 per hour minimum wage are revealing an astonishing lack of understanding about how this state’s economy works.

The $15 per hour proposal is one of several bills aimed at helping lower-income people in Oregon improve their economic standing. Some of these ideas, such as mandatory sick leave, could be workable if applied to employers large enough to absorb the cost. But a dramatic increase in the minimum wage will end up harming — not helping — people at the lower end of the wage scale.

Oregon’s current minimum wage is the second highest in the nation, at $9.25 per hour. It is indexed to inflation, so when costs go up, so does minimum pay. No one would claim that $9.25 per hour is sufficient to support a family, but minimum wage jobs usually are not occupied by breadwinners or heads of households.

According to the U.S. Bureau of Labor Statistics, 50 percent of hourly workers in the United States who earn the $7.25 federal minimum wage or less are ages 16 to 24. A full quarter of them are under age 20. There’s no reason to believe those statistics don’t hold true for Oregon. And when you consider the number of people who work in jobs paying less than $15 per hour, you’re soon talking about tens of thousands of young people whose employment could be threatened by a steep increase in the state-mandated minimum wage.

That’s where some Democratic legislators’ naiveté becomes apparent. They believe businesses and other institutions could simply absorb the added cost of phasing in a 62 percent increase in the minimum wage by 2018. That’s not how the economy functions. If the minimum wage is raised by such a magnitude, businesses must take steps to ensure they can still pay all their bills and have some money left over to reinvest in their operations.

That means businesses will be forced to have fewer employees. They will automate more of their processes to eliminate jobs. If they can’t get by with fewer workers, they will raise prices to cover the added costs. They will buy fewer supplies and services from other vendors, which will have a negative effect on the economy.

Those are economic realities, and they extend beyond for-profit businesses to include nonprofit organizations and even government agencies. All organizations must operate with the revenues they have available. If costs substantially rise, they must make up the difference by reducing expenses in other areas.

Businesses, nonprofit groups and government agencies can handle incremental increases in the minimum wage, as have been implemented in the past, but a 62 percent jump in the next three years will throw more people — mostly younger ones — out of work.

Typical minimum wage employees are high school or college students who work for spending money or to help pay for their education. Others may be just starting out in the work force and looking for experience. Some may be spouses of higher-wage earners who are supplementing their family income.

We don’t dispute that many Oregonians need better-paying jobs to fully support themselves and their families, but raising the minimum wage to more than double the federal requirement will mean fewer jobs for all. The Legislature must look for other ways to help the working poor and avoid measures that will drive up this state’s unemployment rate.

Raising Oregon’s minimum wage to $15 is a simplistic reaction to the complex issue of economic inequality. It’s also one that will backfire on the people it’s intended to help.


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