Oregon’s Minimum Wage Consistently About Half the Median Hourly Wage

On July 1, 2016, the minimum wage increased from $9.25 per hour to $9.50 in Oregon’s 13 nonurban counties, and to $9.75 everywhere else in the state. Oregon’s minimum wage is set by the legislature to rise on July 1 each year through 2022, when it will reach $12.50 for nonurban counties, $14.75 in the Portland area, and $13.50 everywhere else. Starting in 2023, the minimum wage will increase annually with inflation. Nationwide, the minimum wage has remained $7.25 since 2009.

The recent and future increases could change the relationship of Oregon’s minimum wage and median wage over time by raising the minimum wage faster than the median wage. The median wage is the wage at which 50 percent of the jobs pay less and 50 percent pay more. The median wage tends to be a better indicator of what the “average” worker might earn compared with the mean, as the median is not as affected by very high wages.

Over the past decade, Oregon’s minimum wage has been about half the median wage. This is not by design, but Oregon’s minimum wage and median wage have moved roughly in tandem over time. As of early 2016, the most recent figure available, the median wage for most jobs in Oregon was $18.49 per hour. That was double the minimum wage at the time and consistent with the historical ratio of minimum wage to median wage.

Both the minimum and median wages have increased at a similar pace since the early 2000s. However, the percent change for the minimum and median wages varies from year to year. From 2001 to 2016, Oregon’s minimum wage increased at an annual average rate of 2.2 percent per year, while the median hourly wage increased at an annual average rate of 2.4 percent. In some years the median wage increases at a faster rate than the minimum wage, while the minimum wage increases faster in other years. The minimum wage was the same in early 2016 as it was the year before, while the median wage increased 2.6 percent from 2015 to 2016.

Wages are influenced by a variety of factors, but inflation explains at least some of the similarity in the increases of the median and minimum wages over the years. In fact, it’s had a direct impact on the minimum wage since 2004, when Oregon began adjusting the minimum wage each year based on inflation as measured by the U.S. City Average Consumer Price Index for All Urban Consumers for All Items (CPI-U). The inflation-based adjustments will resume in 2023.

It will take a few years before we know for sure if the new minimum wage increases, enacted by Oregon’s legislature to occur each year from 2016 through 2022, will alter the relationship between Oregon’s minimum wage and median wage.

Article written by Nick Beleiciks, State Employment Economist at the Oregon Employment Department.