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.

“Oregon Promise” Is Bad Policy

By Thomas Tullis

On July 17, Governor Kate Brown signed Senate Bill 81, the “Oregon Promise” legislation that allocates $10 million to a “free” community college tuition program for Oregon students.

As a current undergraduate at University of Oregon, I understand the importance of education and the problem of exponentially rising tuition costs. With college tuition increasing ten-fold over the last three decades, Oregon lawmakers likely have good intentions in implementing State Senator Mark Hass’s “Oregon Promise” idea. Good intentions, however, are not enough to make it good policy. Unfortunately, Oregon Promise will do little to solve the problem of tuition affordability. Rather, “free” tuition will actually hurt the cause because government subsidies are a major factor in the high cost of college tuition.

“Free” tuition is a “band-aid policy” because it ignores the real problem of rising costs of higher education. A basic understanding of economics leads to the conclusion that state-funded education encourages schools to raise tuition because they are guaranteed demand. Government subsidies (tax credits, loans, and grants) ensure that colleges can raise tuition and increase their spending, rather than cut costs. Even the government recognizes these unintended consequences: A recent Federal Reserve study showed that government grants and loans have caused a 65% increase in tuition. Oregon Promise won’t make college more affordable; instead, it will allow colleges to increase tuition.

Essentially, “free” education actually ends up costing more. It just doesn’t affect the student’s price directly. Tuition costs don’t go down; instead, the cost is diverted from the student to the taxpayers. Under the Oregon Promise law, it very well may be that Oregon college graduates who already have a burden of student debt will absorb the cost of the new “free” tuition.

As outlined in a recent article in The Oregonian, the legislation has already been criticized for its “last dollar” award calculation structure, by which low-income students eligible for other forms of aid could receive less Promise funding than higher-income students without as much aid. With a tuition rise inevitable, due to the guaranteed demand that these programs provide, those who are denied Oregon Promise money could end up paying even more in tuition.

The policy is negligent in other ways, also. While the opportunity to attend college is important, there are other routes to success for those who don’t fit into the traditional model of classroom higher education. College is not the only way for recent high school graduates to invest in their futures and acquire education and skills. The new Oregon policy encourages and supports only one method of education, while ignoring the importance and value of trade school, apprenticeships, and other paths to a career.

The Oregonian quotes national expert Dr. Sara Goldrick-Rab, a Wisconsin-Madison professor of educational policy studies and sociology, as claiming that “Oregon’s ahead of the whole rest of the country here, at No. 2” [with a free tuition program]. What she doesn’t recognize is that the only education statistic in which Oregon leads the nation is our #1 lowest high school graduation rate. The real solution to tuition affordability would be to free the education market from further government intrusion. Rather than conjuring up a government-funded 13th and 14th grade, Oregon needs to first look closely at our failing K-12 system. Lawmakers should focus on allowing a free market to exist for education providers at all levels, so they can compete on quality and price. A free market in education would help students be better prepared for college—and be able to afford it, too.

Thomas Tullis is a research associate at Cascade Policy Institute, Oregon’s free market think tank. He is a student at the University of Oregon, where he is studying Journalism and Political Science.

Will “Free” Tuition Make College Cost More?

By Thomas Tullis

On July 17, Governor Kate Brown signed Senate Bill 81, the “Oregon Promise” legislation that allocates $10 million to a “free” community college tuition program for Oregon students. With college tuition having increased ten-fold over the last three decades, Oregon lawmakers clearly have good intentions, but that doesn’t make the Oregon Promise legislation good policy. Unfortunately, Oregon Promise will do little to solve the problem of tuition affordability. In the long run, it could actually cause education costs for students to increase because government-subsidized tuition is a major reason why tuition costs are so high in the first place.

Essentially, “free” education actually ends up costing more. It doesn’t just affect the student directly. Tuition costs don’t go down; instead, it only diverts the cost from the student to the taxpayers. Rather than making college more affordable, Oregon Promise will encourage colleges to increase tuition. Government loans and grants enable a guaranteed demand for services that ensures colleges can raise tuition and increase their spending. The government even admits to these unintended consequences with a recent Federal Reserve study that showed that government grants and loans have caused a 65% increase in tuition.

With Oregon boasting the lowest high school graduation rates in the country, lawmakers should focus on allowing a free market to exist for education providers to compete on quality and price. The real solution to tuition affordability would be freeing the education market from government intrusion.

Thomas Tullis is a research associate at Cascade Policy Institute, Oregon’s free market think tank. He is a student at the University of Oregon, where he is studying Journalism and Political Science.