Wednesday, February 3, 2016

Oregon’s Purchasing Power Outperforms Nation

Unlike Oregon’s minimum wage, the federal minimum wage has lost some of its real purchasing power. The national minimum wage in 2016 buys less than it did when it was raised to $7.25 in 2009. To buy the same goods and services today, a worker would have to make $8.14 per hour. So the real purchasing power of the national minimum wage has fallen 89 cents (11%) since its last increase. In contrast, the purchasing power of Oregon’s minimum wage has increased slightly.

Prior to the late 1980s, the national minimum wage was higher than the minimum wage specified in Oregon law, so the federal minimum wage prevailed. The real purchasing power of the minimum wage fell by $2.50 due to inflation in the 1980s, until Oregon raised its minimum wage above the federal minimum in 1989. Oregon’s minimum wage was higher than the federal minimum wage each year since (except 1996, when they were equal) and the increases of the late 1990s were relatively large and fast.

When minimum wage increases are not linked to inflation, the inflation adjusted minimum wage tends to follow a peak and valley pattern. Relatively large increases in the minimum wage occur irregularly and are followed by years of the minimum wage’s purchasing power being eroded by inflation. This means the real federal minimum wage varies over time, which makes long-term planning more difficult for employers and their workers. Oregon’s minimum wage increases have been frequent and relatively small since the switch to annual increases in 2004, helping the real minimum wage remain steady over the years.

For more information on Oregon's minimum wage, read "Oregon's Minimum Wage Jobs: Facts, Figures and Context"

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