Automatic minimum wage increases are not helping the economy

Posted on May 04, 2009

A March 29 article severely underestimates the correlation between Oregon’s minimum wage indexing policy and its skyrocketing unemployment rate (“Three reasons for Oregon’s high rate of unemployment”).

New research from Oregon economist Eric Fruits found that if Oregon’s minimum wage rate had been equal to the federal wage level between 2003 and 2008, the state unemployment rate would have been more than 3 percentage points lower than it is now. That is approximately 40,000 lost jobs that would still be in Oregon had the state remained at the federal minimum wage rate.

With wages that increase on “autopilot” each year regardless of what is happening with the economy, Oregon employers are forced to offset these increases by cutting employee hours and positions from the payroll. Ultimately younger, lower-skilled workers are kept out of the labor market entirely.

State lawmakers should reconsider this auto-pilot wage hike in order to keep jobs and businesses in Oregon.

— Kristen Lopez Eastlick, Senior Economic Analyst Employment Policies Institute, Washington, D.C