At least 40,000 Jobs Lost As a Result of Oregon’s Automatic Indexing
Publication Date: April 2009
Topics: Minimum Wage
WASHINGTON DC – Today, the Employment Policies Institute (EPI) released a new study that shows the extensive job loss resulting from Oregon’s policy of indexing the minimum wage to inflation. The study’s release coincides with a hearing scheduled for today in the House Business and Labor Committee to look at H.B. 3053, a proposal that would prevent increases in the minimum wage in years when the state’s unemployment rate exceeds the national level.
The study, by Oregon economist and Pacific University professor Eric Fruits, finds that higher minimum wage policies in Oregon and neighboring Washington are associated with an increase in unemployment. Over the period between 2003 and 2008, Oregon’s average unemployment rate was 9 percent. The study found that if Oregon’s minimum wage was equal to the lower federal minimum wage rate, the state’s unemployment rate would have been 6.2 percent. The difference represents approximately 40,000 lost jobs in the state over that six year period.
EPI’s new report also found that younger members of the labor force are more likely to be adversely affected by automatic annual wage hikes. It concludes, “Oregon’s high minimum wage results in an unintended dilemma for these lower skilled applicants: Their inexperience makes them unemployable at the higher minimum wage but they cannot get experience to justify the higher wage.”
This study echoes decades of research which shows that increases in the minimum wage particularly harms vulnerable groups like teens and adults without a high school diploma. Research from the University of Georgia in 2006 found that every 10 percent increase in the minimum wage was associated with a 4.6 to 9 percent decline in teenage employment in small businesses.
“Oregon’s indexing provision, which automatically increases the minimum wage without any mechanism for review during times of economic crisis, is a failed policy that is costing tens of thousands of hard-working Oregonians their jobs and other work opportunities,” said Kristen Lopez Eastlick, Senior Research Director of the Employment Policies Institute. “This study confirms once again there is no free lunch when mandating high wage levels for new entrants to the labor force.”