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PSU's Potiowsky advocates more spending on public works, education.

Photo Credit: TRIBUNE PHOTO: PETER WONG - Chuck Sheketoff, left, of the Oregon Center for Public Policy, and former state economist Tom Potiowsky discussed Oregon's economy during the Feb. 6 City Club of Portland meeting.An increase in Oregon’s minimum wage is not a cure-all for the state’s economy or economic inequality, says one of Oregon’s most prominent economists.

But Tom Potiowsky says he endorses spending on public works and reining in college costs to boost Oregon’s prospects as the state emerges from the long economic downturn.

While public policies may help, he said Friday at the City Club of Portland, “public policy is not as strong to be able to change some of the streams we have seen in our economy.”

Potiowsky is a professor and chairman of economics at Portland State University, where he also is the director of the Northwest Economic Research Center. From 1999 to 2011, with a 16-month break from 2006 to 2008 to return to PSU, he was the chief economist for state government.

Raising Oregon’s minimum wage — which at $9.25 is the nation’s second highest, only to Washington state — is a focal point of the current legislative session. Labor unions and other groups back an increase in stages up to $15; businesses say such an increase would be harmful.

“Raising it in my mind would not cause a large disruption, and it probably would be helpful in trying to change economic inequality,” Potiowsky said in response to a question by Chuck Sheketoff, executive director of the Oregon Center for Public Policy, after his presentation. “But that’s just only one little aspect.”

Sheketoff’s think tank, based in Silverton, has endorsed an increase. “It seems that is a no-brainer,” he said before asking his question of Potiowsky.

Friday's Forum was the last for Sam Adams, the former mayor who became executive director of the City Club of Portland in 2013. He is leaving to lead a new environmental initiative in Washington, D.C.

The Oregon House has two proposals pending. House Bill 2008 would raise the minimum wage in steps to $12.20 per hour by 2017, then link it with the federal poverty level. HB 2009 would raise it to $15 by 2018, then link it with inflation, as is done now.

In his presentation preceding a question-and-answer session with Sheketoff, Potiowsky acknowledged that the minimum wage has become a political debating point.

“This really is a consequence of our increasing income inequality and what we feel is a need to do something about it,” he says. “Well, it really comes down to whether my economist is stronger than your economist.”

Other steps

Potiowsky is a stronger advocate of two other government actions: Spending on public works, and reining in the growing cost of higher education.

Oregon lawmakers and their federal counterparts in Congress are talking about raising money for transportation projects and other public works spending.

“When you invest in public infrastructure, it is an investment that has a return,” Potiowsky says. “These are things that are useful and help us grow.”

Oregon lawmakers and President Barack Obama have floated proposals to make community college free for two years, although Potiowsky says how that will be paid for is unresolved.

But he says something must be done to restrain college costs.

“We know that education is linked to higher employment rates, wages and salaries, and homeownership,” he says. “What happens if we close down access to higher education?”

Student loans now ranks second only to home mortgages as a share of household debt, Potiowsky says — and such liabilities make it difficult for young people to buy homes and make other purchases that stimulate economic growth.

"What it comes down to is that we have to reset our priorities," he says.

Positive signs

Potiowsky says Oregon’s economy is finally looking up. “We really have quite a few signs that the patient is much improved and continues to get better,” he says.

Among those indicators:

• Oregon’s unemployment rate has fallen from a peak of 11.6 percent to 6.7 percent, and even though the rate hovers around 7 percent, “people are encouraged to move back into the labor force.”

• Oregon has regained the number of jobs lost during the downturn. Portland emerged first, he says, and now outlying areas are seeing growth.

• Oregon’s job growth rate was 2.8 percent for 2014, and the fourth-quarter rate was the best since recordkeeping began 25 years ago. Even the construction sector, which lost 30 percent of its workers during the downturn, is starting to gain.

• Oregon’s population growth, which had slowed to less than 1 percent annually a few years ago, is gaining again.

Negative signs

“But the patient may have some health problems,” Potiowsky adds. “They are problems acquired during the recession and not totally healed now, and pre-existing conditions that persist after the recession.”

Among his points:

• The duration of unemployment grew from an average of 20 weeks during past recessions to 40 weeks during the lowest stage of the most recent downturn — and still averages 33 weeks.

• Oregon’s labor force participation rate, like those in other states, has been dropping since 2000. Though some of that decline can be attributed to an aging population, Potiowsky says it’s also happening with the 45-54 age group. As older workers remain off the job longer, he says, their skills decline and employers are less likely to hire them.

• Though middle-income jobs in fields such as teaching and construction are returning, Potiowsky their share of the total workforce is declining relative to low-wage and high-wage jobs.

• The purchasing power of Oregon’s middle-income families is virtually unchanged since 1990, and their average incomes have fallen by 4.6 percent — while the top 20 percent of households, which account for 50 percent of Oregon's total income, gained 1.1 percent.

• Oregon’s poverty rate — 16.7 percent in 2013 — continues to exceed the national average, and racial and ethnic minorities have the greatest disparities in education, employment and income.

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Adds details of minimum-wage proposals pending in the Oregon House.

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