Testimony in Favor of SB 437 – The Educational Opportunity Act: “The Power of Choice”

By Kathryn Hickok

Director, Children’s Scholarship Fund-Oregon

Dear Chairman Roblan and Members of the Senate Education Committee:

My name is Kathryn Hickok, and I am director of the Children’s Scholarship Fund-Oregon. For almost twenty years our nonprofit program has provided privately funded partial-tuition elementary scholarships to children from lower-income Oregon families. As CSF-Portland, we originally served Washington, Multnomah, and Clackamas counties. Our program area now includes the entire state of Oregon. We are currently sponsoring students from Beaverton to Bend and Albany to Medford.

The Children’s Scholarship Fund-Oregon is a permanent program of Cascade Policy Institute and part of the Children’s Scholarship Fund national network of scholarship granting organizations (www.scholarshipfund.org). CSF and its partner programs are committed to empowering families in need with the ability to choose the K-8 schools that best meet their children’s needs, regardless of their ability to pay or the neighborhoods where they live. To be eligible for a scholarship, families must demonstrate financial need according to standards similar to the Federal free and reduced price lunch program. Our scholarships are financed through the generosity of local Oregon donors and matching grants from the national Children’s Scholarship Fund.

Our experience with the educational choices made by the lower-income Oregon families participating in our program demonstrates several key points relevant to this bill:

First, lower-income parents want to take charge of their children’s futures through educational opportunity; and when they are given a real choice, they do so. While their financial means are limited, our parents are knowledgeable about their options and determined to make any sacrifice to raise their children to be well-educated, responsible, and successful adults. Parents in our program value high-quality education as the way out of poverty for their children and make the commitment and sacrifice of paying a substantial portion of their tuition themselves.

Second, demand for broader educational opportunities in Oregon is real. When our program began in 1999, the parents of more than 6,000 children applied for only 550 available scholarships. Weekly, parents call and email me because they want to find the right educational fit for their children. It could be a specialized program or school tailored to their learning or physical needs, or they could be looking for educational opportunities not available in the public school assigned to them by their home address. Senate Bill 437 would give Oregon families greater power to choose among the broad range of educational choices and learning opportunities currently available, or available in the future, using money the state already allocates for their children’s education.

Third, it does not take a lot of money to change a child’s life. Our scholarships average about $1,500. That small amount can make the difference in allowing children to attend schools they love, that motivate them to do their best, and that foster their individual talents. Education Savings Accounts would make an even greater, empowering difference for parents in where they send their children to school and how they tailor their kids’ entire educational experience to their unique needs and talents.

The benefits of an Education Savings Account program for Oregon families are not theoretical for us. As a charitable scholarship program, CSF-Oregon helps parents to choose the schools best suited to their children’s needs. This bill extends educational options to more children in our communities. It will make a real and immediate difference in thousands of lives, just when they need it the most.


Kathryn Hickok


Children’s Scholarship Fund-Oregon

Education Savings Account Informational Hearing Testimony in Favor of SB 437

Before the Senate Education Committee

By Steve Buckstein
Cascade Policy Institute

Chair Roblan and members of the Committee, my name is Steve Buckstein. I’m Senior Policy Analyst and Founder at Cascade Policy Institute, a public policy research organization based in Portland.

I want to share some thoughts about the value of Education Savings Accounts in general, and SB 437 in particular, which we’ve branded the Educational Opportunity Act: The Power of Choice.

Next, Professor Eric Fruits will briefly discuss the Fiscal Impacts of the bill.

Finally, you’ll hear from Oregon’s 2012 Mother of the Year, Bobbie Jager, about the importance of providing different educational options for different children.

School Choice programs allow students to choose schools or other educational resources and pay for them with a portion of the tax funding that otherwise would go to the public school assigned to them by their ZIP code.

While school choice is popular with large segments of the public, opponents worry that specific programs like vouchers or Education Savings Accounts may drain funds from the public school system.*

What these concerns overlook is that public funding for K-12 education should actually help educate students, not simply fund schools whether or not they meet specific student needs.

The latest and most versatile school choice programs being enacted across the country are Education Savings Accounts. Unlike vouchers, which only let parents pay for private school tuition, ESA funds may also be used for other approved educational expenses, such as online learning programs, private tutoring, community college costs, and other customized learning services and materials.

Also, while voucher funds all go to private school tuition or are lost to the families, funds remaining in ESA accounts each year may be “rolled over” for use in subsequent years, even into college. This creates incentives for families to “shop” for the best educational experiences at the lowest cost, as well as incentives for schools and educational programs to price their services as low as possible, not as high as possible as might be done under a voucher program.

Five states already have limited ESA programs. Nevada passed a near-universal ESA program in 2015, but its legislature has yet to fund it. In November 2015 your Committee heard from the author of that bill, 16-year public school teacher and state senator Scott Hammond. He told you that he viewed vouchers as the rotary telephones of the school choice world, and that ESAs are the smartphones of that world.

Vouchers just let parents choose a different school, but ESAs offer the equivalent of apps on your smartphone. You can use ESA funds for tuition at a private school, to pay for online courses, pay for tutors, pay for a Sylvan Learning type program, and/or pay for other approved educational options. A student is free to spend part-time at their local public school, and the rest of the time making other educational choices with the proportional share of their ESA funding.

In 2008, Cascade Policy Institute sponsored a School Choice Video Contest in which we asked parents and students to tell us what school choice meant to them. I want to show you one of my favorite entries. It’s from a 15-year-old homeschooled student in Southern Oregon.

[Shoes video]

If the Shoe Fits, Wear It! This legislature is about to allocate at least $8.2 billion taxpayer dollars to an education budget that may, in effect, fund shoes that aren’t a good fit for many of our children. ESAs would help some of those families find better-fitting shoes for their kids.

In addition to funding concerns, some critics of ESAs argue that they violate the principle of church/state separation. In Oregon, they might think that SB 437 violates Article 1, section 5 in our state constitution, which basically prevents the state from spending money for the benefit of any religious institution.

But it won’t! The public interest law firm Institute for Justice has studied the bill and concluded that it doesn’t violate either the Oregon or the U.S. Constitution. You have their complete legal analysis on OLIS.

Briefly, at the federal level, the 2002 Zelman Case before the Supreme Court found that as long as it’s the parents, not the state, deciding where a school choice program’s funds go, it doesn’t matter if the parents choose religious schools because it’s the parents, not the state, making those choices.

At least two state supreme courts, in Arizona and Nevada, have found the same thing with regard to ESAs and those state constitutional provisions, which are similar to Oregon’s so-called Blaine Amendment.

Now, let me give you a feel for how much more flexibility ESAs offer over the old voucher plans, and why they’ve sprung up so recently.

It wasn’t too long ago that if our parents or grandparents wanted to make a phone call they would pick up the receiver and ask a phone company operator to place their calls. Later, how glorious it was that we could use our rotary phones to spin out our own calls, even long-distance ones if we could afford the high per-minute costs. Then came digital phones, and finally cell phones became affordable to the masses. But even the early cell phones had limited uses.

You may not remember, but none of us had any cell phone apps before 2008, because there weren’t any. None. Imagine: All you could do on your cell phones before 2008 was make phone calls, maybe text, and maybe connect to the World Wide Web on a slow internet connection.

Just nine years later, over 2 billion people worldwide use apps on their smartphones. You may have dozens of apps on your phone today, and even if you only use a handful of them regularly, that’s a world away from what it was like before 2008. Lots of things are a world away from what they were like before 2008 — except for public education.

Consider the children in our schools today. Many of them have never known a world without smartphones and their apps. Rotary telephones, even landlines, are likely just historical oddities to them. Much of their world is new, except the way we adults try to educate them by sitting them down in rows, in a classroom with kids who are the same age, all in front of one teacher lecturing about some subject they may or may not find interesting and relevant to their lives.

Yet, many teachers see kids’ smartphones as a problem, right? They’re watching their screens instead of sitting politely in rows listening to the math lesson at 10, or the history lesson at 2.

We say that we want our kids to learn how to take advantage of technology, take STEM courses, and be prepared for the new careers awaiting them. So why do we see their use of that technology every day as a problem! They’re not paying attention to the teacher! They’re bored with school. The Shoes we make them wear aren’t good fits for many of them.

We know that they’ll likely find value in many of these subjects later in life, but if they can’t learn those lessons in ways that are relevant to them now, they may never learn them at all; or they may learn them too late to avoid painful life experiences between now and then.

In 2007, the House Subcommittee on Education Innovation, chaired by Representative Betty Komp, heard compelling testimony about some of those kids during a hearing on an earlier school choice bill, HB 2010. It was given by Black Portlander Jomo Greenidge, who describes himself as an educator and technologist.

Jomo can’t be here to talk with you today, but he hopes you’ll watch his earlier testimony and think about how Education Savings Accounts could help kids like these today.

[Jomo Greenidge video testimony]

Since Jomo gave that testimony in 2007, smartphone apps emerged, followed by Education Savings Accounts, which act much like smartphones of the school choice world. Many students in our schools today, and all the kids entering our schools tomorrow, will grow up in a world with modern communication and app technology.

It’s time we recognize that much of the money we tax and spend on their educations might not be meeting their educational needs. It’s time that we consider the Education Savings Account approach to let their families have some control over how that money is spent so it better meets their needs.

Other states have debated, and some are adopting, ESA programs this year. The pressure to pass more such bills will only grow.

We know that SB 437 won’t pass this year. While we’re thankful for this Informational Hearing, many Oregon families want more. Many Oregon families can’t wait for years to get their kids into better fitting Educational Shoes.

We can debate the details, but please take this issue seriously and help these families by passing an ESA bill soon, hopefully in the 2018 session.

Thank you.

* A 2009 scientific survey showed us that 87 percent of Oregon families with school-aged children want the ability to choose other than their local public school. And the results were similar for Republicans, Democrats, and Independents. So why do some 90 percent of them still send their kids to their local public school? You know why. It’s because they can’t afford to pay federal, state, and local taxes to fund that local school and pay for private school tuition at the same time. ESAs will give them the financial ability to make some other choices if they want to.

And, if 20 percent of Portland public school teachers send their kids to private schools, why would we think that 20 percent of their neighbors might not want to do the same, if they could afford it?

Based on data from the 2000 US Census, a report was published looking at where public school teachers sent their own kids to school in the nation’s 50 largest cities. It found that public school teachers send their own kids to private schools at much higher rates than their neighbors.

In Portland, 12.7 percent of parents sent their kids to private schools, but 20 percent of public school teachers who lived in Portland sent their kids to private schools. Doing some basic grade school math shows that teachers in the largest cities were 23 percent more likely to send their children to private schools, but in Portland they were 57 percent more likely to do so.

So, will SB 437 bill drain funds from public schools, or will it leave them harmless while allowing many students to make different choices? The answers depend on several assumptions which have now been evaluated by Eric Fruits, Ph.D. in a new review and evaluation of a universal ESA program for Oregon. The amount of the ESA deposits is the biggest driver of fiscal impacts.

As introduced, SB 437 would provide participating students with disabilities and in low-income households $8,781 per year (current state funding) in their ESAs. All other participating students would receive $7,903 (90% of current state funding). As Introduced, based on the assumptions below, the Fiscal Impact on the state and local school districts could be in the range of $200 million annually based on the following assumptions:

■ 90 percent of 61,000 students currently enrolled in non-public education would participate in the program.

■ Seven percent of 563,000 students currently enrolled in public schools would participate.

Based on these assumptions, the program has a fiscal “break even” for state and local school districts combined at an ESA annual amount of $6,000 for each participating student with disabilities and/or in a low-income household and $4,500 for all other students.

These are the dollar amounts proposed in the -1 Amendment to the bill. If fiscal impact were the only measure by which to evaluate this ESA program, the analysis shows that the program is “optimized” at an amount of $3,000 for each participating student with disabilities and/or in a low-income household and $2,250 for all other students. Once fully implemented, the program would save state and local governments $53 million a year.

Of course, fiscal impact is not and should not be the primary measure of this, or any well-designed school choice program. But, it is a political reality that such a program should not impose a fiscal burden on the state at a time that all budgets are under pressure.

The primary measure of this ESA program should be that it offers Oregon families as much choice as possible in how their children take advantage of educational opportunities funded by the state. The full report is here: Education Savings Accounts: Review and Evaluation of a Universal ESA in Oregon

Testimony on SB 847 Regarding Management of Common School Trust Lands

Testimony of John A. Charles, Jr.

President and CEO, Cascade Policy Institute 

Regarding SB 847

June 5, 2017

My name is John Charles and I have been closely following the management of Common School Trust Lands since 1996.

Sadly, the Trust Lands have been steadily losing value as an endowment asset during that entire period. For example, the Elliott State Forest was estimated to be worth over $800 million in 1995; it is currently a liability for the Common School Trust Fund.

The 620,000 acres of rangelands had net operating income of -$1.2 million in 2016.

SB 847 offers a pathway for the disposal of underperforming lands, but it’s difficult to see how a proposed transfer to other public bodies would be compliant with the fiduciary duty that Land Board members have to CSF beneficiaries.

Funds that the legislature might appropriate to “buy out” Trust Lands have to be paid by taxpayers. A large subset of that group will include beneficiaries of the CSF, including public school parents, school board members, public school teachers, and other school employees. Taxing them with debt service on bonds, as is now being proposed by the Governor for the Elliott, would be taking money away from them.

The Trust Land portfolio includes 1,540,000 acres of lands, as displayed in the attached summary from the most recent DSL status report. The estimated return on asset value for 2016 was 0.4%, which is an inflated number due the unknown market value of 767,100 acres of “Mineral and Energy Resource” lands and 13,200 acres of “Special Stewardship Lands.” They have minimal value to the CSF as an endowment asset, and that will not change.

The only way to carry out the fiduciary duty to CSF beneficiaries is to inject new, private capital into the picture. The state should sell the remaining Trust Lands – which could be worth more than $700 million — and invest the net proceeds in the Common School Fund, where annual total returns of 5%-8% could be expected for centuries to come.

[Click Download the PDF to view exhibits]

Testimony in Opposition to HB 2720 A Regarding Virtual Charter Schools

By Steve Buckstein

Co-Chairs Monroe and Smith Warner and members of the Joint Committee on Ways and Means Subcommittee on Education:

I’m Steve Buckstein, Senior Policy Analyst and Founder of Cascade Policy Institute, a public policy research center based in Portland. I’m writing in opposition to HB 2720 A which would require the Oregon Department of Education (ODE) to conduct a study on virtual public charter schools.

My major points of opposition second those of Dr. David Gray, Executive Director of the Metro East Web Academy. He “…served in traditional public education for over 30 years as a state department executive, superintendent, assistant superintendent, National Blue Ribbon School Principal, and a state and nationally recognized teacher.”  In his written testimony submitted on March 3rd he stated, in part:

“I share your passion for public education. Unfortunately, the traditional education system is broken….Traditional systems are effective for some students but not all and many of those succeed in spite of the good intentions of professional educators This is why we must not limit options for students.

“Although HB 2720’s purpose seems innocuous as some would perceive it to just be a study; it is actually one more study to examine a system of virtual schools that have been studied over and over throughout the United States. In fact, the study purports to use the same data points that are readily available on the ODE website, which will undoubtedly include metrics such as graduation rates, state assessment results, and attendance data. I can not think of a bigger waste of taxpayer dollars, especially in a year when resources are scarce and legislators are scrambling to create an adequate educational budget.

“Ultimately, if it is important to study virtual schools – why don’t we do a study on all of our high schools to determine why students are leaving traditional high schools and coming to charter schools? Why are there so many at-risk students? Do traditional brick and mortar schools add value to a student’s education? Do we know the answers to these questions?” [emphasis added]

In light of these well-stated concerns, HB 2720 A seems a costly distraction that could keep the legislature, ODE and all Oregonians from focusing on the real problems facing our public education system.

I urge you to oppose HB 2720 A.

Thank you,

Steve Buckstein
Senior Policy Analyst and Founder

Testimony Before the Oregon State Land Board Regarding the Potential Sale of the Elliott State Forest

By John A. Charles. Jr.

The decision before you today is simply one of exercising your fiduciary duty. You have an offer on the table of $220.8 million in private funds. If you accept the offer, the money will be deposited in the CSF, where it will immediately begin earning income for schools.

Alternatively, the various public ownership options require: (1) persuading the legislature to approve the sale of $100 million in state bonds so that taxpayers can “buy” an asset they already own; and (2) paying debt service on the bonds. Those costs (presently unknown) will be paid in part by public school parents, teachers, and other CSF beneficiaries. Therefore, debt service has to be subtracted from earnings on the invested $100 million.

Additionally, a new HCP will need to be negotiated. Since DSL has failed to do this for over 15 years, this is a highly speculative “benefit.” It’s also possible that even with a new HCP, timber harvesting would result in continued losses to the CSF.

As the chart below indicates, over a 100-year horizon, the difference between the Lone Rock offer and the public ownership option is roughly $1.08 billion in earnings. There is no plausible scenario in which continued public ownership can make up that loss. As fiduciaries, this is not even a close call: you should take the offer in hand.

CSF Financial Projections for New Revenue Derived from the Elliott State Forest 

Lone Rock Offer vs. Continued Public Ownership

Cumulative CSF Payouts to Schools @4% of Annual Earnings

Assumes total annual return of 5.58% (CSF average for 2000-2015)

  Add timber harvest revenue Subtract cost of debt service payments Cumulative payout to schools – first 10 years Cumulative payout to schools – first 100 years
L. Rock – $220.7 M invested 6/1/17 N/A N/A $99,107,680 $1,956,775,945
Bond sale – $100 M invested 9/1/17


Requires new HCP; could also result in annual losses ??? $44,300,595 $874,668,232
Difference ??? (???) ($54,807,085) (1,082,107,713)

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

Testimony Regarding Senate Bills 432, 602, 608, 612 and 618

Testimony of John A. Charles, Jr.

President & CEO, Cascade Policy Institute

Regarding Senate Bills 432, 602, 608, 612 and 618

April 6, 2017

Advocates of land-use planning strongly believe that the benefits of planning always outweigh the costs.

But no regulatory system is perfect. Certainly the Oregon program can be improved, if we have the will.

The most obvious problem is that land-use regulation imposes a static vision on a dynamic economy. Oregon demands “urban containment” as the top priority, enforced through urban growth boundaries and rural exclusionary zoning. This has to result in an imbalance between housing supply and demand, leading to rapid price escalation. There is no other logical outcome unless planning advocates have invented a new economic theory that only they understand.

The bills under discussion today may not be the perfect responses to current problems, but surely at least one of them could be used by the Committee as a vehicle for modest reform.

I encourage the Committee to pick one flaw in the Oregon system and address it going forward.

You could focus on the dysfunctional urban growth boundary management process, the punitive “Transportation Planning Rule,” or perhaps farmland preservation requirements that are disconnected from economic reality.

It doesn’t matter which problem you address, but to say that no flaws exist and all reform bills must be killed year after year is not plausible.

Failure to address obvious problems will undermine public confidence in the legislative process. Please use the remaining time in this session to solve at least one problem related to zoning.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

Testimony Before the Senate Business and Transportation Committee in Support of SB 656, SB 657, and SB 659

Testimony of John A. Charles, Jr.

President & CEO, Cascade Policy Institute

Before the Senate Business and Transportation Committee

In support of SB 656, SB 657, and SB 659

April 3, 2017

The Public Purpose Charge (PPC) was originally authorized by the legislature to run for 10 years: from March 2002-March 2012. It was anticipated that subsidies for conservation, renewables, and market transformation would no longer be necessary after that time.

The chart below shows that the original forecast was correct. PPC administrators are running out of things to do. The low-hanging fruit for retrofits has been picked, and newer homes have been built to stringent energy codes. The mission has largely been accomplished.

Therefore reducing the PPC from 3% to 2%, as called for in SB 657, is appropriate. In 2019 you should drop it by another percent, and then phase it out entirely in 2021.

Keep in mind that the Energy Trust receives additional ratepayer funding through the “increment” allowed under SB 838. During 2017, that increment will more than double the amount of money that ETO will receive from the basic PPC. Therefore, the Trust would continue to have significant funding regardless of what you do with these bills.

Ratio of Energy Benefits (kWh saved or generated) to Expenditures

All PPC Administrators

2003-2004 2005-2006 2007-2008 2009-2010 2011-2012 2013-2014 2015-6/2016 % change, 2003-6/2016
ETO Conservation 5.7 6.6 6.7 4.4 4.5 5.3 3.4 -40%
ETO Renewables 13.8 4.0 33.5 1.6 1.4 2.0 1.6 -88%
School   districts 0.8 0.6 1.0 0.5 0.5 0.3 0.4 -50%
OHCS low-income 1.3 0.9 0.7 0.5 0.8 0.4 0.6 -54%
Self-direct (conservation) 7.2 3.2 4.3 5.2 3.0 2.5 3.8 -47%

Source: Biennial reports to the Legislative Assembly on PPC expenditures, all years. 

Since the PPC was first authorized in 1999, it has escaped scrutiny by the legislature. The oversight called for in these bills is long overdue and I encourage your support.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.

Failed Promises: Why the Legislature Should Reject TriMet’s Request for New Spending Authority

TriMet is currently seeking new spending authority in SB 1510 to help finance regional “multi-modal” transportation projects. Legislators should deny this request based on previous experience with TriMet commitments.

To refresh the memory: during the 2003 session, TriMet sought approval to increase the payroll tax rate by one-tenth of a percent. According to TriMet’s then-General Manager,

“TriMet’s proposed payroll tax increase will be used exclusively to provide new or enhanced transit service. This will include assisting in the operation of Washington County Commuter Rail, Clackamas County light rail, Lake Oswego Streetcar, a substantial increase in Frequent Service routes, and enhanced local connections to these lines.”[1]

The rate increase was approved, and was phased in over a 10-year period.

During the 2009 legislative session, TriMet sought an additional rate increase. The legislature again approved the request. The TriMet board approved the first of 10 planned rate increases last September, and the new rate of 0.7337% went into effect on January 1, 2016.

Let’s look at the results. After a decade of tax increases, it’s clear that there is no correlation between increased TriMet revenue and actual levels of service: 

TriMet Financial Resource Trends for Operations, 2004-2015



2004 2006 2008 2010 2012 2014 2015 % change
Passenger fares $55,665 $68,464 $80,818 $93,729 $102,240 $114,618 $116,734 +110%
Tax revenue $155,705 $192,450 $215,133 $208,933 $248,384 $275,357 $292,077 +88%
Total operations $290,513 $342,274 $404,481 $433,609 $488,360 $522,155 $493,572 +70%


In fact, there is negative correlation – as TriMet’s revenue went up over the course of a decade, actual service went down: 

Annual Fixed Route Service and Ridership Trends for TriMet



2004 2006 2008 2010 2012 2014 2015 % change
Hours of service 1,698,492 1,653,180 1,712,724 1,682,180 1,561,242 1,608,090 1,676,826 -1.3%
Miles of service 27,548,927 26,830,124 26,448,873 25,781,480 23,625,960 23,763,420 24,248,910 -12%
Originating rides 71,284,800 74,947,200 77,582,400 77,769,119 80,042,810 75,779,560 77,260,430 +8.4%

 Note: The term “originating rides” excludes transfers.

Source: TriMet, http://www.trimet.org/pdfs/publications/trimetridership.pdf 

There is a slight correlation between revenue and transit use, as total originating rides went up 8% while operating revenue went up 70%. However, ridership peaked in 2012 and has dropped by 3.5% since then.

TriMet claims that the 2003 promise of “enhanced service” was met because many new rail lines were built. But to the 66% of TriMet riders who travel by bus and saw their service drop by 12%, shiny new rail lines were of little consolation.

TriMet now wants to expand its reach through SB 1510 so as to spend new funds for “multi-modal” projects. We suggest a simple response: unless and until TriMet transit service returns to at least 2004 levels, no additional spending authority should be granted.

[1] Fred Hansen, testimony before the Senate Revenue Committee on SB 549, March 11, 2003, p. 3.

John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization. 

Government-Imposed Minimum Wage Increases Don’t Work for Oregon Small Businesses

The concept that everyone should earn at least some government-mandated minimum wage is politically very appealing. It’s almost the classic example of taking from the few and giving to the many. “The few” in this case are portrayed as rich businessmen who could never spend all the money they have, so what’s wrong with making them pay their workers a little more? Now, proponents of raising Oregon’s minimum wage are trying to convince us that somehow such policy is actually good for small business owners.

A recent report from the Oregon Center for Public Policy claims that a higher minimum wage works for small businesses by giving them “more of what they need most: customers with money.”

In reality, raising the minimum wage would only benefit small businesses if owners didn’t mind depleting their own savings or investment funds in order to support higher labor costs. Otherwise, they would have little choice but to raise prices, which would harm all their customers, especially those on the lower rungs of the economic ladder.

And, because minimum wage laws actually cut off those lower rungs on the economic ladder, younger, less educated, and less experienced workers will be even less likely to get or keep the very jobs they need to be customers in the first place. They may spend their unemployment checks, but those checks won’t go as far once prices are raised to cover the higher labor costs that a boost in the minimum wage imposes.

The argument that a higher minimum wage pumps more money into the economy assumes that the resulting pay increases are somehow “new money.” In reality, much if not all of that “new money” will be offset by a corresponding loss of savings or investment funds that otherwise would contribute to more economic growth and hiring more workers.

Just because low-wage workers are likely to quickly spend any wage increases doesn’t mean that on balance that’s good for small business. Taken to its logical conclusion, that would mean small business owners, and everyone else, should never save and invest for the future, but immediately spend every dollar they earn also. If this behavior really benefitted the economy, why are we seemingly so concerned about the dismal rate of saving and investing for retirement among Oregonians? Couldn’t small businesses benefit even more by encouraging everyone to spend all their income right now?

Another set of arguments for raising the minimum wage include the assumptions that higher wages “motivate employees to work harder;” “attract more capable and productive workers;” “lead to lower turnover, reducing the cost of hiring and training new workers;” and “enhance quality and customer service.”

While higher wages may lead to the benefits stated above, if business owners believe that is the case then they should be willing and eager to raise wages whenever possible. The fact that minimum wage proponents want to force business owners to reap these benefits weakens their case.

Finally, there is a real irony in the campaign to boost Oregon’s minimum wage. Minimum wage laws conspicuously leave out a class of individuals who don’t get a paycheck from someone else, but hopefully get one from themselves. Self-employed people, small business owners, and entrepreneurs trade a steady paycheck for the opportunity to be their own boss. They often risk everything―their homes, their savings, all their assets―to build a business that might someday earn them a much higher paycheck than they could ever earn working for someone else.

But, while building a business, many entrepreneurs actually earn less than the minimum wage. They may actually have negative earnings, dipping into savings or borrowing money to keep their doors open and pay their employees. And yet, if these risk-takers hire anyone to help them make their dreams come true, government says they must pay those workers at least $9.25 per hour in Oregon today, and perhaps as much as $15 per hour in the near future.

So, while business owners are free to do a lot of things, and take a lot of risks, one thing they cannot do is hire anybody for less than the minimum wage, even if they are earning less than that themselves. Of course, this may not be a winning argument politically.

It’s easier to demonize supposedly “rich” business owners than to tell workers and job seekers the uncomfortable truth that to be employed in a successful business they must produce as much or more value than they wish to be paid.

Proponents of raising the government-mandated minimum wage know that they have little to lose and much to gain politically by telling young, less educated, and less skilled workers that they deserve to be paid more, and it’s only greedy business owners standing between them and the higher wages they desire.

Let’s just hope that if another bump in Oregon’s minimum wage results in some workers losing their jobs and others not getting hired in the first place that they place the blame for their troubles where it belongs―not on employers, but on those who promised them higher wages but couldn’t deliver because economic reality stood in the way.

1 2 3 13