Oregon's 'highest-in-nation' minimum wage shows benefits

SILVERTON - Oregon's "highest-in-the-nation" minimum wage continues to raise wages for former welfare recipients and other low-wage workers without harming their employment opportunities, according to a new study by the Oregon Center for Public Policy (OCPP).

The 1996 voter-enacted increase was fully phased-in last January, and data through the first quarter of 1999 show it has reversed years of declining wages for welfare recipients and other low-wage workers.

The Oregon minimum wage increased from $4.75 per hour to $5.50 per hour on Jan. 1, 1997, and to $6 on Jan. 1, 1998. The final phase of the wage increase was implemented on Jan. 1, 1999, raising the minimum to $6.50 per hour. The OCPP study documents that:

* Workers at the 10th percentile of the wage distribution (90 percent of workers had higher earnings) experienced a 15.5 percent increase in their wages, after adjusting for inflation, in the two years following the minimum wage increase. These workers' wages had fallen 7.5 percent between 1994 and 1996, prior to the first minimum wage increase.

* Over 150,000 workers that had been earning less than $6.50 before 1999 have now been lifted up to and above the new minimum wage level.

* Real hourly starting wages for former welfare recipients rose to $7.23 in the first quarter of 1999, nearly a 2 percent increase over 1998, bringing the starting wage back up to pre-1994 levels.

* As many as one-half of the welfare recipients moving to work at the end of 1998 likely received a raise because of the 1999 minimum wage increase.

* The employment rate for young workers with low education levels grew faster than the rate for the workforce as a whole subsequent to the minimum wage increase. "The study shows that the rising minimum wage has clearly brought much-needed raises to Oregon's low-wage workers," noted Jeff Thompson, an economist with the Oregon Center for Public Policy and author of the study. "The minimum wage increase is good for working families and is good for Oregon."

According to the study, none of the evidence indicates that employment opportunities have been harmed. Employment rates have risen for young workers with low levels of education and placement rates of welfare recipients have gone up since the minimum wage was increased in 1997.

To help determine the effectiveness of the state's welfare reform program, state welfare officials monitor the starting wages of parents who go to work and leave welfare.

"Until the minimum wage increased in 1997, welfare reform in Oregon was a part of the problem of declining wages for low-wage workers," said Thompson.

The report also notes that during the time of declining wages, the welfare agency changed its focus from providing education and training to pushing untrained welfare recipients into the workforce with a "work attachment" or "work-first" model.

According to Thompson, "despite any downward pressure that the work first approach to welfare reform may have had on wages, welfare recipients moving to work have clearly experienced real wage growth in the years following Oregon's minimum wage increase, reversing previous trends."

By studying workers at the 15th percentile with wages 50 cents above the 1998 minimum wage level, the OCPP study also documented that the minimum wage increase did not just help minimum wage earners. "The study gives further credence to the argument that a minimum wage increase has a ripple effect, raising the wages of workers with earnings modestly above the minimum wage," said Thompson.

"As legislatures around the country, voters, and members of Congress consider proposals to raise the minimum wage, they can look to Oregon to see that raising the minimum wage helps make work pay for parents seeking to leave welfare and to support their families," said Thompson.

"Oregon's congressional delegation, legislators, and welfare officials can proudly tell their colleagues from other states to look to Oregon's minimum wage as an example of how to make welfare reform work," he said.

The Oregon Center for Public Policy is a non-profit research organization that analyzes budget, tax, and program issues important to low- to moderate-income Oregonians, the majority of Oregonians.

June 18, 1999 issue

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