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HASSO HERING

A perspective from Oregon’s mid-Willamette Valley

What forced pay hike would cost

Written February 3rd, 2016 by Hasso Hering
The Linn County government maintains it would not have to comply.

The Linn County government maintains it would not have to comply with a minimum wage hike.

We ought to amend the state constitution to require anyone running for the legislature to have at least three years experience as an employer in private business. We won’t do this, of course, but if we did, destructive schemes like the currently proposed jump in the Oregon minimum wage would not even come up.

Senate Bill 1532 is up for a work session in the Senate Workforce Committee today, Feb. 4. It would raise the minimum hourly wage for the current $9.25 to $9.75 in July and further increase it in steps to $13.25 in July 2022, and to $14.50 in the Portland metro area.

Linn County has told the committee it would refuse to comply as far as the county’s payroll goes, based on the 1996 constitutional amendment prohibiting unfunded state mandates on local government, unless enacted by a three-fifths ratio in both houses. (Too bad that in the list of witnesses, the legislature’s website identified Linn Commissioner Roger Nyquist as representing Lane County.) Linn’s position is nicely provocative but probably would not hold up. My own reading says the amendment applies to new state programs or services, which a statewide minimum wage law certainly is not. We’ve had the minimum wage for eons.

Individual business owners have told the committee what the forced wage hike would do.

A senior home care business in Bend serves about 200 old people. It pays caregivers $11 an hour and charges its clients an average of $24 an hour. After paying payroll taxes and costs, plus overhead including rent, health insurance, auto expense and so forth, the business clears about 5 percent of revenue. A forced wage hike of 23 per cent or more would force it to raise rates, which most of its seniors on fixed incomes can’t afford. That would send them to Medicaid, most likely.

The owners of four Salem restaurants told the committee the new sick-leave law already raised their costs $26,000 a year and they’re raising prices to cover that. Their employees are paid $9.25 and most make an additional $10 an hour in tips, which don’t count as wages. The owners say the proposed wage hike would force them to close the restaurants and let 50 employees go.

From Diana Marsden, owner of two small retail stores in Happy Valley and Hillsboro with hourly wages from $11 to $16, the committee got hard numbers. A forced wage hike to $13 would raise her costs by $1,867 a month or $2,624 including payroll taxes. Considering her gross margin, her sales would have to jump more than $5,000 a month to come out even. But she’d have to raise all her pay scales in fairness, necessitating a further sales jump. Her business would have to soar by more than $9,000 a month. “This is impossible,” she says. Result: She’d have to close.

The committee heard from New Seasons Market, an upscale grocery chain in the Portland area, in favor of the increase. According to the testimony, the company thought it wise to raise its starting pay to $12 on Jan. 1. Now it wants the law to force others to pay more as well so it’s not up there by itself.

If New Seasons can pay new employees more than the state minimum, great. But wise lawmaking would not force employers to pay more than their business can sustain. (hh)



9 responses to “What forced pay hike would cost”

  1. Dad says:

    My own father has in-home care. Due to the new sick-leave law the rate has just been increased from $21.00/hr to $23.00/hr. For us, this is expensive in the first place.
    To contain costs, we have had to cut back the caregivers’ hours by 10% which not only means that my father gets less help per week, but adds additional stress to our family.

    As far as I’m concerned progressive, upscale stores (grocery or otherwise) can pay their associates as much as they’d like, but they should know that in doing so they price many of us out of the market. No pun intended.

  2. tom cordier says:

    I think the proposed increase in min. wage is new on its face and the challenge will hold up. The legislative council opined it was valid.

  3. Bob Woods says:

    Why should business pay less than what it takes to keep a person working the equivalent of a full time job (2080 hours/yr) out of poverty? A person with even minimal disposable income is a better customer, which helps business to survive and expand. But the real answer to the question is very simple.

    They do it because they can. And that’s the bottom line.

    There is no doubt that there are marginal businesses that are on the verge of failure. That is the nature of a capitalist economy. “If you can’t make it, you go down the tubes. That’s the way it’s supposed to work.” my old Professor Dr. Lenny Ritt used to say. He was right.

    And when a company goes down the tubes, their more efficient competitors benefit and expand. That expansion benefits the workforce, thereby moving jobs from one business to another.

    Yet, when companies pay less than what it takes for people to stay out of poverty, society steps in through a whole range of programs, both private charities and government, to keep those folks afloat.

    Those costs to support those folks are real costs whether through taxes or gifts. Those costs aren’t just supporting the poor, they’re supporting those minimum wage paying businesses that should otherwise fail, and the profit margins of businesses that are in no danger of failure of any kind.

    Most people make a lot more than the minimum wage.According to the Oregon Bureau of Labor & Industries only about 6% of the workforce is minimum wage. That’s about 100,000 people statewide.

    According to the US Bureau of Labor Statistics nationwide those making minimum wage or less are 62% women.and the biggest industry group by far is Leisure & Hospitality, where 18% of their workforce is at or below the federal minimum wage. By occupation it is overwhelmingly in the restaurant/food preparation and service industry (47%), and also in other personal services, which By Dad talked about above.

    I am not discounting what By Dad has to say and the increasing costs he/she faces. Yet why is the answer to By Dad’s problem keeping other people working and living in poverty?

    Set and keep minimum wages at a level that people can live at. Let capitalism sort out which businesses survive.

  4. H. R. Richner says:

    A mandated minimum wage is unfair to all those who can never find a job because they are not able to contribute the corresponding necessary value to the economy. It is immoral for the state to decree that its citizens may not exercise their right to freely contract at their own terms.

    In this context it should be mentioned that one of the most successful countries in the world, Switzerland, has never had any mandated minimum wage.

    • Bob Woods says:

      Further, people REALLY ought to go see about wages in Switzerland:
      http://www.swissinfo.ch/eng/salaries/29235700 such as:

      “The cost of living in Switzerland is among the highest in the world, but workers also earn among the highest salaries.

      Salaries in Switzerland are paid once a month and are often based on a 13-month system. That means an annual salary is paid out in 13 instalments—one a month until the end of the year when a worker receives two instalments. Working less than a full year means the 13th month payment is typically paid on a pro-rata basis. It is not the same as a bonus.

      There is no statutory minimum wage in Switzerland, although some labour agreements set minimum salaries in specific fields, such as in the catering and hotel sectors.”

      AND…

      “The right to holidays and time off is also enshrined in law. The employer must grant all employees for each year of service a minimum of five weeks off for employees and apprentices below the age of 20 and four weeks off for employees and apprentices above the age of 20. This minimum duration is often increased by employers, especially for workers who have been at their posts for many years.

      Other reasons for taking time off:
      Sick leave: In general, most employers require a doctor’s certificate if you are away from work for more than three consecutive days because of illness. The law requires that employers pay salaries for a limited period to employees who are involuntarily prevented from working because of illness.

      Other types of leave include the so-called “youth leave”, which guarantees five extra days of leave per year to all employees and apprentices under the age of 30 who work voluntarily on behalf of young people. Employers often also grant employees days and hours off for their marriage, the birth of a child, the death of close relations or friends and moving house.”

      Maternity leave: Salaried women or those exercising a self-employed occupation have a right to maternity leave. The same right is granted to women working in their husband’s company for a salary in kind. During the 14 weeks following birth they receive 80% of the average income of their gainful employment before birth. For more on this subject please visit the State Secretariat for Economic Affairs (Seco).”

  5. Bob Woods says:

    The United States, THE most successful country in the world, has had a minimum wage since 1938.

    • Wait a second. You go from extolling the social and economic virtues of Switzerland to calling the U.S., with its persistently high poverty rate and numerous other problems, “THE most successful country in the world”? Look up the by-now riff by actor Jeff Daniels (playing a role, obviously) for where we really stand. (hh)

      • Bob Woods says:

        Not extolling virtues, just showing how in Switzerland they may not have a minimum wage, but they have more stringent requirements and processes than the US, that significantly raise the costs of employment.

  6. tom cordier says:

    Hasso–please consider placing a max. word count for an individual to blog. thanks.

 

 
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