Supporters of minimum wage hikes pooh-pooh critics who warn that increased labor costs lead to lower employment.
They suggest that employers, notorious for sitting on bags of money, are able either to absorb increased labor costs, or increase prices to offset costs without negative impacts to employees.
It’s political claptrap Oregon legislators spouted this month when they passed a three-tiered wage hike scheme. The people who run Oregon’s public universities quickly proved it a fallacy.
The law hikes the current statewide minimum wage of $9.25 to $9.75 in July.
Under the law, the state is divided into three regions. Over six years the wage increases by different rates in each region, based on population, median income and cost of living. In Portland, the minimum wage will reach $14.75, in rural and coastal counties with struggling economies it will top out at $12.50, and $13.50 in the rest of the state by 2022.
State budget analysts couldn’t begin to calculate how much this would cost government, let alone private businesses, in extra wages and benefits. But no worries, supporters said, because studies show that increasing minimum wages has no impact on employment and hiring.
The people who run Oregon’s public universities must not have received the memo.
Universities typically hire students at minimum wage to fill a variety of jobs around campus. The wages of students in the federal work study program are picked up by the federal government, but hundreds of others are paid out of university coffers.
Shortly after Gov. Kate Brown signed the measure into law, our colleagues at The Oregonian reported that the wage hikes will cost the seven universities millions in additional labor costs, and force them to look at cutting hundreds of jobs held by student workers to cut costs.
Officials at Oregon State University told the paper that the hike would increase the cost of the more than 7,800 students it pays by $4.8 million in the next biennium. At the University of Oregon, the tab will be an extra $2.3 million in the same period, and rise to $6.1 million extra when the wage hits the top rate. Portland State University is looking at $2.5 million in extra costs in the 2017-2019 cycle.
A spokesman for OSU said the hike could cost 650 to 700 students their jobs. PSU said it would likely make budget cuts and raise tuition.
It probably came as no surprise to freshmen economics majors that a multi-million dollar hike in labor costs has to be offset either by an increase in revenues — tuitions and fees — or a reduction in expenses — job cuts. Unfortunately, legislators skipped that class.
If caught off guard that public universities, agents of the state, are talking job cuts in light of hikes in the minimum wage, imagine their surprise when local retailers, restaurants, hotels, nurseries, orchards, packing houses and processors start doing the same.