Today’s Wall Street Journal takes a look at Oregon, where voters in 2002 opted to raise the minimum wage to $6.90 per hour, and index it to cost-of-living increases in subsequent years.
As the article notes, academic economists tend to believe that raising the minimum wages stifles the creation of new jobs—but apparently it doesn’t always play out that way in practice. In Oregon, for example, unemployment fell and wages rose after the minimum wage was increased (though I’m sure that the doomsayers would say that neither trend has anything to with the state’s minimum wage policy).
Leaving that debate aside, take a look at this snippet:
Foes say Oregon has hurt its ability to attract and retain business, and warn that the effects will be long-term. Restaurant and farm industries argue that voters didn’t understand that indexing meant businesses would have to keep raising wages. [Emphasis added.]
Uh, maybe someone’s been misquoted, or maybe I’m just too dumb to follow the logic.
But to me, indexing the minimum wage to inflation doesn’t mean that businesses “have to keep raising wages.” It means that they can’t keep lowering wages.
The math isn’t complicated, folks—if inflation goes up, but your salary doesn’t, then you’ve gotten a pay cut. Simple as that. So Oregon didn’t vote for continual increases in the minimum wage. It voted to keep the minimum wage steady. To claim otherwise is sleight of hand—and dopey sleight of hand, at that.
Jan
But to me, indexing the minimum wage to inflation doesn’t mean that businesses “have to keep raising wages.” It means that they can’t keep lowering wages.I think you missed a point you could have made: if a restaurant’s cost of ingredients goes up, and they subsequently raise the price of their meals by the index of inflation, is it fair to not raise wages as well? Or should they just pocket the difference?With the spectre of Peak Oil, I believe ’70’s-style double-digit inflation is about to return, big time. At least minimum-wage workers in Oregon will have some protection.
Arie v.
The problem with the focus on minimum wage is that most of those making it are not poor, rather more likely to be dependents and that not everyone who is poor makes the minimum wage. Try living on even $10/hr in Seattle. Earned Income Tax Credits and a more progressive income tax should be the top priorities, though not as simple to explain to an electorate.
schoon
Um, maybe I’m a dummy, but either way, isn’t it a matter of clearly stating your denominator? If you’re talking straight dollars, with no inflation adjustment, then Oregon’s minimum wage does indeed “go up” (2003 dollars/2002 dollars). If you’re talking inflation-adjusted dollars, then Oregon’s minimum wage neither goes up nor down. It just keeps pace, whereas the non-adjusted minimum wage in other states steadily goes down in terms of purchasing power. Maybe we need a new common currency that is comparable over several decades (loaves of bread, Milky Way bars, 20-pound chinook salmon?).