More Data to Consider as Portland Debates Raising Its Minimum Wage

Late last month, Portland Mayor Michael Brennan announced the initial details of his plan to raise the city’s minimum wage. If passed, the bill would likely raise the wage from its current $7.50/hour to $9.50/hour in January 2015, with anticipated hikes following in each of the next two years.

The final fate of the proposal is still at least a few months away, but one thing is certain from similar measures passed in other American cities: the debate will be heated. Proponents and opponents are set to advocate on behalf of low-wage workers and small business owners respectively.

In January 2014, the Washington D.C. city council and mayor voted to increase the city’s minimum wage from $8.25/hour to $11.50/hour by 2016 in three phases. The first increase went into effect on July 1, raising the wage to $9.50/hour. A new study out today from the Urban Institute concludes that the rise in wages will have no significant impact on the city’s employment. Here are a few highlights.

  • Family incomes: On average, annual incomes for one half of families earning the minimum wage would increase by $1,500 when the wage reaches $11.50/hour. Another quarter would realize a $500 annual increase.
  • State and federal benefits: Reductions in eligibility for state and federal benefits (from increased income) would offset some of this extra income, but the average family would get to “keep” 50 percent of the increase they experienced.
  • Impact on employment: Increased wages for all minimum wage workers will be offset by an average of 1 percent job losses within this population. That means an estimated 471 jobs lost out of the 41,000 individuals the policy will impact District wide. The Institute based its findings on the assumption that employment drops 1 percent for every 10 percent increase in minimum wages.
  • Impact on Public benefits: Requiring employers to pay higher wages means that low-wage workers will need fewer public benefits. The study concludes that enrollment in the federal Earning Income Tax Credit (EITC) and DC EITC programs would drop by 3 percent and 2.5 percent respectively. Enrollment in Supplemental Nutrition Assistance Program (formerly “Food stamps”) and Supplemental Security Income would drop by 2 percent each.

There is one important distinction between the DC hike and the one Mayor Brennan has proposed. Unlike DC, the Portland proposal—if passed in its current form—would apply to tipped workers as well. In Portland, tipped workers would earn an hourly wage one half that of non-tipped workers, or $4.75/hour. Mayor Brennan has also pledged not to permit special industry carve outs or exemptions. His intent is for the increase to apply evenly across all sectors.

There is a public hearing on the mayor’s proposal set for August 20 at 5:00 p.m. The location has not yet been announced. As policymakers and residents of Portland debate the issue, the Urban Institute’s analysis can illuminate possible impacts of following DC’s example.