Portland, OR September 17, 2012 – Oregon will increase its minimum wage from $8.80 to $8.95 on January 1, 2013, the state's Bureau of Labor and Industries announced Monday. The raise comes as part of a state law that provides for annual rate adjustments based on the Consumer Price Index so that the minimum wage keeps pace with the rising cost of living. Oregon's minimum wage increase will translate to an additional $300 per year in wages for a full-time minimum wage worker.
The National Employment Law Project said the measure will help boost consumer spending and that such annual adjustments to the minimum wage help combat stagnant wages. Ten states already index their minimum wage and Congress is now considering a similar proposal for the federal rate.
"Wages are falling as a result of sustained high unemployment, slow job creation, and declining unionization," said Christine Owens, executive director of the National Employment Law Project. "These modest annual minimum wage increases are one of the few policies that counteract declining wage trends and prevent America's lowest-paid workers from falling even further behind."
The ten states that increase their minimum wage annually to ensure pay rates for the lowest-paid workers keep up with rising living costs are: Arizona, Colorado, Florida, Missouri, Montana, Nevada, Ohio, Oregon, Vermont, and Washington. Those states will all announce new January 1st rates in the coming weeks, with the exception of Nevada, which indexes its wage in July. Eighteen states plus the District of Columbia have minimum wage rates above the federal level of $7.25 per hour, which is just over $15,000 per year for a full-time minimum wage earner.
Since the federal minimum wage is not indexed to inflation, its real value erodes every year unless Congress approves an increase. In real terms, the federal minimum wage is 30 percent lower today than in 1968. The Fair Minimum Wage Act of 2012, recently introduced in the U.S. Senate and House of Representatives, would help recover much of this lost value by raising the federal minimum wage to $9.80 by 2014 and henceforth adjusting it annually with rising living costs. The act would also raise the minimum wage for tipped workers from its current low rate of $2.13 per hour, where it has been frozen since 1991, to $6.85 over five years. Thereafter, it would be fixed at 70 percent of the full minimum wage.
Several states also advanced proposals this year to raise the minimum wage and add an annual cost of living adjustment, including New York, Connecticut, Missouri, New Jersey, and Illinois, along with citywide increases proposed in Albuquerque and San Jose. Additional states are considering such proposals for next year.
Strengthening the buying power of low-wage workers is especially critical in this economic climate. A recent NELP study confirms that low-wage occupations have accounted for a majority of jobs created in the post-recession recovery. The unbalanced recovery has contributed to the long-term rise in inequality in the United States: Since the first quarter of 2001, employment has grown by 8.7 percent in lower-wage occupations and by 6.6 percent in higher-wage occupations; by contrast, employment in mid-wage occupations has fallen by 7.3.
A large body of research shows that raising the minimum wage is an effective way to boost the incomes of low-paid workers without reducing employment. A groundbreaking 1994 study by David Card and Alan Krueger, current chair of the White House Council of Economic Advisers, found that an increase in New Jersey's minimum wage did not reduce employment among fast-food restaurants. These findings have been confirmed by 15 years of economic research, including a 2010 study published in the Review of Economics and Statistics that analyzed data from more than 500 counties and found that minimum wage increases did not cost jobs. Another recent study published in April 2011 in the journal Industrial Relations found that even during times of high unemployment, minimum wage increases did not lead to job loss.
A NELP report from earlier this year found that 66% of low-wage employees work for large companies, not small businesses, and that more than 70% of the biggest low-wage employers have fully recovered from the recession and are enjoying strong profits.
The National Employment Law Project is a non-partisan, not-for-profit organization that conducts research and advocates on issues affecting low-wage and unemployed workers. For more facts and resources about the minimum wage, visit nelp.org or raisetheminimumwage.org.
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