The Oregon Legislative Fiscal Office recently released a report outlining the potential effects of increasing the minimum wage in Oregon.
Oregon, at $9.25 per hour since January 2015, is one of 29 states with a minimum wage that exceeds the federal minimum wage of $7.25.
Some states are experimenting with more than one wage level, as is being considered now by Oregon legislators.
Minnesota, beginning in August, will have a minimum wage of $9 per hour for employers with annual sales volumes of $500,000 or more. For those employers making under the $500,000 mark, the wage will be $7.25 per hour.
Oregon Employment Department figures show that nearly 6 percent of all jobs in the state paid Oregon’s minimum wage – then $9.10 per hour – in the first quarter of 2014. Malheur County showed 10.9 percent of all jobs paying minimum wage, the highest percentage of minimum wage jobs in the state.
Proposals to raise the minimum wage have sparked questions about the cost to both the public and private sectors.
The Oregon Department of Administrative Services estimates a $13.50 minimum wage will increase costs of state jobs $1.1 million for a full biennium. If raised to $15 per hour, the costs to have state employees jumps to $4.8 million per biennium.
Not counting colleges, an increase to $13.50 would mean school districts need to come up with an additional $23 million per biennium. Some $52 million must be found if the wage is increased to the $15 level.
Along with increased costs for personnel, state universities and community colleges have warned an increased state minimum wage may reduce student workers’ abilities to receive other assistance.
In addition, colleges using contract instructors who receive a flat amount or stipend may end up paying these contract employees less than the new wage.
Universities are estimating additional costs of $2.15 million for the 2015-17 biennium and $16.49 million for the 2017- 19 biennium for a $13.50 wage. Other research has stated the estimate could go as high as $75 million for a $15 wage.
Looking at the private sector, the Fiscal Office looked at jobs only related to state subsidized funding or under contract with state agencies.
In care facilities for seniors and people with disabilities, more than half the work force statewide is paid less than $13.50 per hour. A survey of state health services in 2014 show direct care staff making less than $11 an hour.
Officials anticipate pressure on state government to increase providers’ rates to compensate for a higher wage to the staff.
The same is true for childcare providers serving DHS clients. Currently, more than one-half of the providers report making less than $13.50 per hour. A Secretary of State audit in 2015 reported the average wage for childcare workers in Oregon to be $11.18 per hour.
The report outlines some unexpected consequences of a higher minimum wage. It is possible that 23 percent, or 125,000 clients, currently participating on the Oregon Health Plan would possibly lose coverage through that program if they had the higher wage.
Other programs could also be affected. A small number of SNAP (Supplemental Nutrition Assistance Program) clients could see a reduced benefit due to a higher income. However, more than 65 percent of SNAP recipients are listed as having no hourly wage.
As changes would occur in household incomes, changes in reimbursements to the school nutrition programs would also change accordingly. Impacted programs may include the National School Lunch Program, School Breakfasts Programs, After School Snacks and At-Risk Afterschool Meals Program, Summer Food Service Program and the Special Milk Program. As districts countywide receive free school lunches due to poverty distinctions, these districts could lose funding for the free meals.
Those looking to continue their education after high school graduation may find decreased financial aid available due to increases in student and parent incomes. This aid also includes the ability to work for work-study jobs.
According to the state study, the wage shift also could affect Oregon’s federal money for programs including Head Start, Healthy Families Oregon and Child Care and Development Fund Vouchers.
Federal money is based on the income or proportion of households under the federal poverty level compared to other states. If the comparative household income rises, the state could lose some federal funding for programs.
A 2013 study looked at 400 pairs of counties – adjacent but on different sides of a state border – with minimum wage differences. This study found “no statistically significant effects of a minimum wage increases on either employment or hours worked in restaurants or other low wage industries.”
The Oregon study found that if minimum wage is increased, private business could respond by reducing hours or employees or reducing employees, absorbing the increased costs, raising prices, reducing benefit costs, or just accepting lower costs. It is also mentioned teens looking for work may be the most affected group.