Oregon’s Minimum Wage Law Perverts Compassion into Coercion

Picture two Oregon workers. One, a highly skilled and educated woman named Kate, earns well over $40 per hour based on a 40-hour work week. The other—a younger, less skilled, and less educated woman also named Kate—has a job that pays her Oregon’s minimum wage rate of $9.25 per hour.

The first Kate happens to be the Governor of Oregon. She, along with some of her colleagues in the legislature and activists on the campaign trail, believe that the second Kate should be paid as much as $15.00 per hour by law, depending on where she lives.

Wanting our second Kate to earn more is commendable; but forcing Kate’s employer to pay her more than he or she can afford, or more than Kate may be worth to their business, is not commendable.

Some politicians may feel good by “giving” more money to the Kates of Oregon, but how should they feel for “taking” that money from someone else?

I join many policy analysts, economists, and business owners in pointing out the negative effects of raising Oregon’s minimum wage. Younger, less educated and lower-skilled workers may lose their jobs, or not gain jobs in the first place, if the law prices them out of the labor market. Some employers will be forced to hire fewer workers, let some workers go, and/or raise their prices to all the Kates of Oregon who will blame them, not the politicians, for their suddenly higher cost of living.

But, the practical effects of raising the minimum wage, good or bad, should not cause us to forget the moral aspects of a state policy that dictates what one adult is required to pay another. Voluntary transactions between workers and employers are moral; imposing wage floors from Salem or any other layer of government is not.

I have no illusions that Oregon’s Governor, legislature, and activists will now see the light and abandon their plans to impose yet another burden on employers while helping some workers at the expense of others. I simply want it on the record that I agree with the author who wrote:

“The minimum wage is the modern perversion of compassion into coercion: I believe there is a moral imperative for you to earn more, so I force someone else to pay more. I feel moral while sticking someone else with the bill.”*

So, rather than raise Oregon’s minimum wage rate, the legislature should do the moral thing and end the policy altogether. Then we can all work together with Oregon Governor Kate Brown to find better, moral ways to help all the other Kates of Oregon earn more money without perverting our compassion into coercion.

* Doug Bandow, Cato Institute, January 14, 2014, The Minimum Wage: Immoral and Inefficient.


Steve Buckstein is Founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

 

Will Oregon Price the Least-Skilled out of the Workforce…Too Slowly?

As Oregon’s February legislative session approaches, Governor Kate Brown wants to head off a contentious minimum wage ballot measure that would raise Oregon’s rate up to $15 per hour over three years. But, her plan seems to upset all sides.

She has determined that the Portland area minimum wage should be exactly $15.52 by 2022. She has also figured out that the rest of the state should impose a $13.50 minimum by 2022. “That is entirely too long” to wait, according to activists behind the ballot measure.

Solid research concludes raising the minimum wage at all is not an effective way to alleviate poverty. It is, however, an effective way to pander to voters who either don’t read the economic literature, don’t believe it, or don’t care.

Oregon already has one of the highest minimum wage rates in the country at $9.25 per hour. But, with some cities and states determined to raise their rates to $15 soon, our Governor’s $15.52 Portland area proposal over six years may not be enough to keep us at the forefront of pricing the least-skilled people out of the workforce altogether.

Perhaps she should go for a $30 minimum wage rate by 2030. Or a $40 rate by 2040. Or…well, you get the idea.

Steve Buckstein is Founder and Senior Policy Analyst at Cascade Policy Institute, Oregon’s free market public policy research organization.

The Minimum Wage Conversation Never Ends

Oregon and some other states mandate that their minimum wage increase every year with the Consumer Price Index. Based on that formula, last Wednesday it was announced that Oregon’s minimum wage, the second highest in the country at $9.25 an hour, will stay unchanged in 2016.

That same evening during the Republican presidential debate, one candidate called for both a higher national minimum wage and for indexing it to inflation. He argued that this would mean “we never have to have this conversation again in the history of America.”

Well, if Oregon is any example, that’s not exactly true. Oregon began indexing its minimum wage in 2002. Yet, earlier this year, there were no fewer than twelve legislative bills introduced to raise the rate to as high as $15 per hour. Activists promised that if the legislature didn’t act, they would put a measure on the 2016 General Election ballot.

So clearly, putting minimum wage increases on autopilot won’t take this conversation off the table. Until legislators and voters understand that income cannot be generated by state mandate, minimum wage increases will continue to hurt the very workers they’re meant to help: the young, the less educated, and the less skilled. They are the ones who often can’t produce enough value for employers at higher wage rates to justify gaining or keeping a job.

Minimum Wage Follies

Fourteen bills have been introduced in the Oregon legislature to raise Oregon’s already high minimum wage or let localities do so. Apparently, some legislators believe that political laws can override the laws of economics.

In this case, the law of supply and demand tells us that raising the price of labor will lead employers to demand less of it. Those hurt will likely be less skilled, younger, and less educated workers who will find it harder to find jobs or will be let go from jobs they did have at lower wages.

Not exactly the outcome proponents foretell, but they may be OK with it because those harmed by their policy aren’t likely to blame them. They’re more likely to blame the employers who let them go or don’t hire them in the first place.

Proponents know that they have little to lose and much to gain politically by telling workers that they deserve to be paid more, and that it’s only greedy business owners standing between them and the higher wages they desire.

If legislators don’t commit the folly of increasing the minimum wage this year, a union backed group has filed an initiative to raise it from the current $9.25 up to $15 per hour. That will give voters the opportunity next year to commit the folly themselves.

Seattle’s Giant Job Killer

By Erin Shannon

The city of Seattle made history last month with an ordinance that will force every employer in the city to pay every worker a $15 per hour minimum wage, which is the highest in the nation. But before progressives in Portland try to hold up Seattle as a model, they should watch what happens to workers there. The controversial wage mandate passed by Seattle’s City Council has not even been enacted yet, but it is already having a chilling effect on jobs.

Small business owners are expressing deep worry over the coming super-high minimum wage. Many of these job creators say they are holding off on opening new ventures or expanding their current business in Seattle, while others say they are delaying plans to hire new workers. A commercial property landlord says several of her tenant business owners may not renew their leases if the $15 wage becomes law.

As she puts it, “It’s just too expensive to operate in the city.”

Even business owners who have supported a higher minimum wage are having a change of heart. Jody Hall, owner of Cupcake Royale and respected progressive activist, initially supported a $15 minimum wage. But now she says the proposed policy is “keeping me up at night like nothing ever has.”

Hall told KUOW/NPR radio she now has “serious second thoughts” about a $15 minimum wage, especially since Seattle would be “going it alone” with a wage that is significantly higher than any other minimum wage in the nation.

Her second thoughts about a $15 minimum wage mandate have led to second thoughts about expanding her business. She had planned to open a new business in Seattle this year but has tabled the idea for now. Hall says if she considers any new locations in the near future, they will be outside the city limits.

That is one way a high minimum wage often kills job opportunities, by eliminating them even before they are created.

A city-commissioned study says a $15 minimum wage would help low-wage workers and reduce poverty. But the mandate can help only people who have jobs; this study omitted any estimations of the impact on employment. A subsequent study by a Seattle economist predicted significant job losses.

 

It would seem the Seattle economist has been proved right early. The $15 wage is not yet in effect, and it is already pushing businesses into neighboring cities and killing jobs in Seattle, as business owners stop growing their companies and hiring new workers.

Employers cannot pay workers more than the value of their output. If an employer must pay a worker $15 per hour, he must ensure the worker produces at least that amount in economic value, or the employer will be forced to reduce the cost of labor in the only legal way remaining, by cutting benefits or hiring fewer people.

That’s what is happening in SeaTac.

Northwest Asian Weekly reports employees subject to the narrowly passed $15 minimum wage law in that Seattle suburb say they have lost benefits such as 401(k) plans, paid holidays, paid vacation, free food, free parking and overtime hours. One hotel waitress said she is earning less now because tips have decreased since the high wage law. In many cases these benefits, plus the previous minimum wage, added up to more than workers receive under the $15 wage law.

As one SeaTac worker put it, “It sounds good, but it’s not good.”

SeaTac’s $15 minimum wage has been in effect less than six months, and workers in that city are discovering the high-wage mandate comes with a steep cost. In Seattle, a minimum wage has not even gone into effect, and employers are already adjusting by canceling plans to expand and hire new workers. We can expect many Seattle businesses to cut benefits as SeaTac employers had to. Others, especially small businesses, will be forced to lay off workers.

“$15 Now!” is the battle cry of activists in Seattle. A more accurate slogan would be, “It sounds good, but it’s not good for workers.”

The last thing workers need is fewer jobs.


 

Erin Shannon is Director of the Center for Small Business at Washington Policy Center in Olympia, Washington. She is a guest contributor at Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article originally appeared in the Puget Sound Business Journal.