Sunday, April 19, 2009

Oregon's 12.1% Unemployment, 2nd Highest in US: Is The $8.40 Per Hour Minimum Wage to Blame?

Is Oregon's high minimum wage partially to blame for the state's 12.1% unemployment rate, second highest in the nation (only Michigan is higher at 12.6%, see chart above of Oregon's jobless rate in blue vs. US rate in red)? The major business organizations in Oregon think so, and so do some members of the Legislature: Lawmakers are considering a bill that would override a 2002 citizen initiative and block future minimum wage increases indexed to inflation.

Representatives of the Oregon Restaurant Association, the National Federation of Independent Businesses, the Oregon Farm Bureau and the Oregon Association of Nurseries all argued in a public hearing on Friday that the high minimum wage is hurting Oregon business and contributing to the state's high unemployment rate.

The business leaders noted that Oregon's minimum wage rose by 45 cents an hour, to $8.40 on Jan. 1, even as the state's jobless rate was rocketing up 1% a month. On its face, requiring a substantial jump in wages at the same time the economy is crumbling seems certain to force businesses to cut more and more employees.

MP: Minimum wage, maximum folly (link and link). Demand curves slope downward, whether it's the demand for unskilled labor, skilled labor, aluminum, soybeans or lobster. Reason? There are substitutes for everything, whether it's unskilled labor, skilled labor, aluminum, soybeans or lobster.

Related from BBC: UK Business leaders have called for a minimum wage freeze as part of measures to help private industry drive the economy out of recession.


At 4/19/2009 6:56 PM, Blogger Boris said...

Tough here in Oregon. Lots of layoffs. Lots of businesses that want to hire, but can't afford to. Our minimum wage is tied to the cost of living (to which it contributes). So as the wages go up, the businesses that depend on minimum wage labor raise their prices to compensate, causing the cost of living to increase. It's a never ending loop.

At 4/19/2009 7:02 PM, Blogger juandos said...

Reading this: Minimum Wage Laws in the States - January 1, 2009 and then comparing it to this: Regional and State Employment and Unemployment Summary - Friday, April 17, 2009 makes for some interesting reading...

At 4/19/2009 10:11 PM, Anonymous AMATI NONYMUS said...

a never ending loop.

The multiplier effect in operation
This loop will bring our economy out of the skids. If we can raise the minimum wage to $999 per hour then the workers will be fat enough to spend and tip heavy enough to fuel profit enough to serve as stimulant to all of companies partly owned by Hanke & Bernanke. Vote for the loop.

I promise

At 4/19/2009 11:03 PM, Anonymous Anonymous said...

Oregon's high unemployment rate is due to layoffs in construction and manufacturing not minimum wage food service preparation.

Manufacturing, not exactly a hot bed of minimum wage workers, job losses have tripled since the recession began. Construction job losses are higher in absolute and relative terms than a gig serving Whoppers.

The restaurant association, who have laid off 3000 workers over the last 15 months, is just another group of failed American business people with a tall tale of grilled smoke looking for a bailout.

With a 110% increase (70000) in workers collecting UI benefits since the recession began, the Whopper franchisee's increased minimum wage labor costs are the least of his worries. Some are going to go bankrupt.

The 2008 data here and 2009 data here.

At 4/19/2009 11:05 PM, Blogger Ironman said...

Is the $8.40 per hour minimum wage to blame?

Partially, yes. See Oregon's teen employment levels from 2000 through 2007 (and note that the economy in both the U.S. and Oregon grew in 2007.)

How much do you want to bet the percentage of working teens has dropped precipitously in Oregon this year?

Why teens? Nationally, those Age 16-19 make up roughly 1/4 of all minimum wage earners (I assume Oregon is similar). One can isolate the effect of minimum wage changes from other economic factors by looking at the employment level of this particular age group.

At 4/20/2009 12:31 AM, Blogger OBloodyHell said...

> One can isolate the effect of minimum wage changes from other economic factors by looking at the employment level of this particular age group.

That would be too complicated for Anonymous. Even with his shoes, socks, AND pants off... The numbers are just toooooooo big.

At 4/20/2009 8:04 AM, Blogger spencer said...

absolutely have to freeze the wages of American CEOs or we will not have anyone to operate our corporations.

At 4/20/2009 8:19 AM, Anonymous Anonymous said...

How much do you want to bet the percentage of working teens has dropped precipitously in Oregon this year?Don't change the subject matter, Ironman. The subject is minimum wage + unemployment rate, not labor force participation. The Oregon teenage unemployment rate has been close to the national average for at least the past 3 years. Actually, it clocked in at 17% in 2008 whereas the national average topped 21%.

Now you must have an explanation for South Carolina. No state minimum wage, so the default is the federal minimum wage. The teenage unemployment rate in South Carolina has exceeded the Oregon rate for 3 of the past 4 years.

You can scratch some data here.

At 4/20/2009 10:24 AM, Anonymous Joe Armendariz said...

It's worth remembering that Oregon (Portland) also proudly employ some of the most radical "smart" aka "green" sustainable growth and development policies. I would suggest this is the main cause of their economic woes. California isn't far behind as we continue to adopt more and more anti business regulations in the name of saving the environment (AB32 and SB375).

At 4/20/2009 10:58 AM, Blogger BxCapricorn said...

Oregon (Portland) is dependent on a small number of headquartered companies, international trade through its port (hence the name), and train deliveries of Canadian materials (for export). I am not the least bit surprised that you think making a few dollars above the Federal minimum wage, is somehow to blame. You should know, as an economist, about the power of micro-economics. Poor people spend their money. They have to.

At 4/21/2009 12:50 AM, Anonymous Anonymous said...

Portland, OR was named after Portland, ME...not for the port that is now present in the OR version. Just to be precise here, synchronistic attributes don't convey identical meanings.


At 5/08/2009 5:51 PM, Anonymous Anonymous said...

So far I don't see the Obama plan working in Oregon. When is he going to start paying for our mortgage, gas, ect.. I for one am saving all of my pennies and won't be stimulating the economy any times soon. Thank GOD, I have steady income and don't need a bailout!


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