Higher minimum wage could have negative impacts
Oregon's minimum wage increases approved by the 2016 Legislature could actually reduce the earnings of the lowest wage workers, if the experience in Seattle is any guide. But employers — including those in Newberg, Dundee and St. Paul — face many more challenges than just minimum wage requirements when deciding how many people to hire and how much to pay them.
Those were two recurring themes from a panel discussion on Oregon's minimum wage at a Sept. 20 forum in Portland. The panelists, which included a public policy professor and two small business owners, also answered questions about a wide range of employment issues.
Washington State University professor Jacob Vigdor led a study of the Seattle law that will eventually raise the minimum wage there to $15 an hour for large employers. Released in June, it found there was not much impact when the first of the phased increases took effect. But things changed after the second increase to $13 an hour.
"In Seattle, pay for low wage workers went up 3 percent, but hours (of) work went down 9 percent, reducing their wages $125 an month," Vigdor said of the results of the study, which was required by the law that passed in June 2014.
A similar study released a week earlier found the second increase had no effect on employment. But Vigdor said it only concerned the restaurant industry, not low wage workers in all sectors of the economy, like the university study did.
"We didn't find any change in overall employment in the restaurant industry either, but we did in the earnings of low wage workers," said Vigdor.
The 2016 Oregon law raises the states minimum wage to $14.75 in Portland, $13.50 in mid-size cities and $12.50 in rural areas like Newberg by 2022. Charlene Wesler, owner of a cafe in southwest Portland, was thinking about how to comply with the second increase to $11.25 in July 2017 when something else took priority — a new federal policy preventing her from pooling the tips left at customer tables and dividing them up among all her 14 employees. Under the new policy, only the servers could keep the tips, reducing the money paid to other employees, like the kitchen staff.
"So I decided to go tipless. Instead of allowing tips, we now charge a 20 percent surcharge on all bills that is divided up among the employees," she said.
Wesler added that the move essentially created a profit sharing plan for her employees, changing the way they think about their jobs. They are working harder to increase profits and are constantly thinking about how to reduce costs without sacrificing customer service, she said, adding the quip, "Now when a dish breaks, they cringe too."
Wesler also said the change has also reduced turnover since employees see opportunities for making more money.
"When I first opened my restaurant, a lot of employees told me they were just saving up enough money to go to Europe. I met so many people going to Europe. I think, how can that be? I've never been to Europe," said Wesler, who started her business in 2010 as a food cart specializing in waffles.
Janelle Bynum brought two perspectives to the discussion. She owns four McDonald's franchises in east Portland, Happy Valley, Milwaukie and Oregon City. She is also a first-term state representative from District 51, which includes parts of East Multnomah and North Clackamas counties.
"New requirements may seem to cause problems, but there are good reasons for many of them," said Bynum, citing the paid sick leave requirement approved by the 2017 Legislature as long overdue.
Although Bynum is being required to raise some wages at her franchises, she says a bigger problem is finding enough qualified workers to staff them. As living costs rise in the region, fewer and fewer local residents can make ends meet with entry level jobs, she added.
"We used to hire from the neighborhoods and now we can't. People can't afford to live in Portland anymore," Bynum said.
Vigdor said his research has led him to conclude someone should publish a handbook for employers on how they can pay the higher wages that are coming.
"I've heard enough stories to know that managers are doing more work and customers are being expected to do some of the work, too," he said.
But Vigdor also cautioned that no one should expect higher minimum wages to solve all of society's problems.
"A free market leads to efficient solutions, but not necessarily equitable ones," he said.
The panel was moderated by Kerry Tymchuk, executive director of the Oregon Historical Society. He told the crowd that Oregon was the first state in the county to pass a minimum wage law in 1913. It only applied to women and minors, and required them to be paid a weekly wage of not less than $8.64 a week. At the time, many of them were being paid as little as $3 a week at the time. Businesses appealed the law to the U.S. Supreme Court, arguing states do not have the authority to set minimum wages. They lost and the U.S. Congress passed the first federal minimum wage law in 1938.