This is Oregon Insight, The Oregonian’s weekly look at the numbers behind the state’s economy. View past installments here.
Oregon’s minimum wage rises again on July 1, reaching $14.75 in the Portland area. What’s really intriguing, though, is what could happen next year.
Next month’s increase is the last of seven wage hikes state lawmakers mandated in 2016, which steadily raised Oregon’s hourly minimum from $9.25.
To account for variations in the cost of living, the Legislature set different rates for different parts of the state. In the Portland area, where the minimum wage is greatest, next month’s increase establishes an hourly minimum that is 60% higher than it was before lawmakers acted six years ago.
Oregon’s minimum wage had changed very little from 2009 through 2015, and legislators didn’t want it to stagnate again. So their 2016 bill mandated annual adjustments, beginning in 2023, tied to the rate of inflation.
And here’s where things get interesting.
Inflation was cool when the Legislature passed that bill, and each of the initial wage increases was greater, in percentage terms, than the rate of inflation. This year, though minimum wage workers are getting a 5.4% raise in the Portland area – much less than the rate of inflation.
The latest federal numbers put annual inflation at 8.6%. If that rate keeps up, the minimum wage in the Portland area would hit $16 an hour in July 2023.
We won’t know the actual increase until next spring – it’s based on the inflation rate from March 2022 through March 2023. And it’s anyone’s guess how fast prices will rise over the next several months. The Federal Reserve is raising interest rates in hopes of containing prices.
In the meantime, the number of Oregonians earning the minimum has been falling even as the wage has been going up.
Just 108,000 of Oregon workers earned the minimum last year, 5.1% of the workforce, according to a new report by Anna Johnson, economist with the Oregon Employment Department. That’s down from 6.6% in 2020, and 7.3% in 2019.
The pandemic skewed the 2020 numbers, Johnson said, because hospitality workers making the minimum wage were among those most affected by the pandemic layoffs. And then last year, as Oregon got back to work, employers faced a labor shortage and frequently had to pay far above the minimum to attract workers.
The federal minimum wage has been $7.25 an hour since 2009 and doesn’t appear likely to rise anytime soon, with congressional Republicans and Democrats at odds over how high any increase should be.
But most states, like Oregon, have hourly minimums above the national rate. Oregon’s is among the highest, but a few are even higher.
Washington’s hourly minimum, for example, rose to $14.49 in January. It’s $17.27 an hour in Seattle, which appears to be the nation’s highest minimum wage.
Raising the minimum wage remains contentious politically because it increases costs for business owners and because some fear it would trigger layoffs. Oregon restaurant owners say the escalating minimum wage is one reason menu prices were rising steadily even before the pandemic and the subsequent high inflation.
Oregon’s steady increases over the past several years didn’t translate into higher unemployment, though. The state’s jobless rate has – except for the 15 months after COVID-19 hit – been under 5% since 2015 and is near a historic low now.
And economists say the state’s higher minimum wage is one reason Portland has among the nation’s smallest gaps between high- and low-wage workers and why fewer Oregonians are moonlighting with second or third jobs.
— Mike Rogoway | mrogoway@oregonian.com | Twitter: @rogoway |
