Putting the Annual Minimum Wage Inflator In Perspective

Chuck Sheketoff

January 1, 2005, Oregon's minimum wage workers got a 20-cent raise, from $7.05 to $7.25. That was an increase of 3 percent. They can thank Oregon voters for the increase and those in the Legislature who refuse to go along with the Oregon Restaurant Association's attacks on the annual cost of living increase. The annual increase makes so they tread water with inflation and will remain below the 1999 recent peak and well below the historical peak in 1968.

Today's Portland Business Journal reported that Jim Declusin, president and CEO of Oregon Steel Mills Inc., is getting a raise this year, too. His base salary, not including the bonus he's also getting, is going from $187,000 a year to $560,000. That's right, his board of directors almost trippled his salary.

If Declusin works 40 hours a week, his base salary went from $90 per hour to $269. I know, he works more hours than that. At 80 hours per week, 52 weeks a year, that's $135 an hour, up from $45.

The bottom line: Declusin saw his salary tripple while the minimum wage workers that he interacts with at various points during his work week, on weekends and on vacation, saw their wages go up just 3 percent. And the Oregon Restaurant Association wants the workers serving Declusin food at restaurants to have their tips count toward their minimum wage. Go figure.

  • Jonathan (unverified)

    You probably should have noted in your comments about Oregon Steel that it's stock price (therefore its measure of value to shareholders, which I suspect includes many of its employees) has increased nearly five-fold in the last year. While people can always quibble about whether corporate executives should be compensated for that kind of gain (perhaps the gain is due to demand in China, not anything the executives did or did not do), it's not irrelevant.

  • Michael (unverified)

    Okay Chuck I'll bite. I'm not sure what a CEO's pay has to do with the needs of us working stiffs. Yes many of them, too many actually, are getting more than they are worth, but that is another issue. While I have not seen any stories regarding the impact on employment within Oregon we should keep in mind that Portland is a distinct market from the rest of the state.
    The cost to a business in Portland may not be much, but what can be said about a similar business in Coos Bay, or Burns? Will we see a different impact on the employees in those cities? What has not been explored is any effort to put more money into the hands of the employees by opening other opportunities to them. M.W.

  • Ross (unverified)

    Just because YOU don't think a CEO is worth tripling his salary, doesn't mean he hasn't earned it. When folks like Chuck begin comparing CEOs to minimum wage workers, it is like comparing minor leaguers to major leaguers. One could argue that minor leaguers and major leaguers perform the same job, but major leaguers get paid much more $$$. Why? That isn't fair, right Chuck?

    Simple. Market demand. There is more demand for highly skilled, experienced workers than there are for less skilled workers. Accordingly, each is paid what the market believes they are worth. In theory.

    I say in theory because, assuming for the moment that Jonathon is correct about the value of the stock, the CEO's salary perhaps should have quitupled instead of tripling. But it did not, why?

    The government has installed many market controls that charade as wealth redistribution mechanisms, such as th minimum wage, which is nothing more than an artificial market demand. The effect of the minimum wage is to raise the wage of lower skilled workers at the expense of higher skilled workers. All in the name of Karl's good 'ole wealth re-distribution ponzi scheme.

    In order to justify this artificial re-distribution, leftists like Chuck begin making comparisons that have no basis in reality or logic - like comparing a CEO to the high school student who makes my lattes. What about the Doctor who gets a 15 percent raise last year, should she have received that raise given minimum wage workers received "only" a three percent raise?

    That is the conundrum of Chuck's argument. He has to now place a value on an individual's work product, in order to justify the doctor's 15 percent raise while decrying the CEO's raise in the name of the minimum wage worker. In his initial argument, his underlying assumption that he wants us to agree with is that all workers work product are equal, therefore all compensation should be equal.

    So, then, what do you tell the Doctor?

  • Tom Civiletti (unverified)

    I must admit that Chuck's argument is a bit lame, but it's not nearly as lame as claiming that "The Market" will make everything okay if only liberals will get out of the way.

    Our economy with its surplus of workers did not appear out of the mist, result from natural development, or descend from the hand of an all-knowing deity. It has been shaped by intentional input, and the ceo's, their boards, and the folks who own large chunks of stock have had a lot more input than the people working for minimum wage or not working at all.

    Minimum wage is a blunt tool, somewhat like making 18 the age of consent. Some people are mature enough for sexual relationships before that age. Others are never mature enough.

    The minimum wage helps reduce the number of people starving, living on the street, committing crimes to earn a living, and deriving almost all their livelihood from public funds. It also tends to increase the wages of people who earn more, but not much more, than minimum wage. If you think this is bad, you are a cold-hearted sob with a shaky understanding of economics, in my opinion.

    As to there not being a connection between minimum wage and ceo compensation, I think they both grow out of societal attitudes toward the meaning of wealth and the value of human life. I think attitudes in the US represent a sickness, one that pervades much of our national life. We will not be cured until the ideas that wealth is the proper measure of virtue and human value is discredited. We also need to reject the belief that government is the tool of the devil when it does anything besides kill foreigners and pander to fundamentalists.

  • brad (unverified)

    Tom, that was the best thing I have seen posted here in a long time. Well said.

    Look, people can wrangle all day about the different ways of assigning "value" to a certain person's work or his/her position with a company. But any system that denies the ability of many to provide for their basic needs through meaningful work while rewarding others lavishly beyond measure is morally bankrupt and indefensible at any human level.

  • Jud (unverified)

    Ross, The conundrum of your argument is that more than a few CEOs are abject failures, yet still get hugely lucrative golden parachutes. Many more CEOs merely maintain their companies yet still rake in substantial raises, benefit packages, and stock options on a regular basis.

    And judging by Chuck's very example, it sure doesn't look like there was any cost at all to the higher skilled workers when the lower skilled workers got a raise.

  • engineer (unverified)

    Chuck, my initial reaction is that the minimum wage is none of governments business (similarly the executive, or sports figure who makes big $$ is none of my business-unless I happen to be a shareholder). However economics is not my area of expertise and I'm willing to be educated. My understanding is that raising the minimum wage forces economically marginal companies to cut workers in order to pay for the increase-is this not correct? You economists like to say that there's no such thing as a free lunch, so my question is who wins (obviously the minimum wage worker-anyone else?) and who loses when the minimum wage is raised?

  • Patty (unverified)

    Patty here, from the Oregon AFL-CIO.

    I'm not an economist, either, but the most reliable academic studies show no detrimental effect on employment following increases in the minimum wage. What we see here at home bears that out. Here's what has happened in Oregon since voters passed the minimum wage increase in 2002:

    Low-wage, that is minimum wage, jobs are growing at a pace faster than other wage levels. So it is hard to make a case that it has been a drag on job growth. Meanwhile, the National Restaurant Association predicts that the hospitality industry will grow by 4.8% in Oregon in 2005. So it's hard to make a case that it is hurting the industry that hires the most minimum wage workers. For more on both of these facts, including links to the original research, go to: http://www.unionvoice.org/oraflcio/notice-description.tcl?newsletter_id=1268756. (Sorry, I don't know how to hyperlink here.)

    Further, minimum wage increases can help our economy. Those who argue that tax cuts put more money in consumers’ pockets and are therefore good for the economy are loathe to recognize that increases in the minimum wage do the same thing. But they do. Low-wage workers spend the bulk of their incomes in the retail establishments of their local communities. Dollar-for-dollar, there is no greater stimulus for consumer spending than increased pay for low-wage workers.

    As to the argument that if we keep the minimum wage at a poverty level of, say the federal minimum of $5.15, employers will hire more people, consider this: No one can support themselves on $5.15 per hour. So workers who count on minimum wage will be forced to take two jobs just to make ends meet.

    To contact your lawmakers in Salem about protecting the minimum wage, here's a handy-dandy link:


    When voters passed the minimum wage increase in 2002, they said that no one in Oregon should be forced to work full time and live in poverty. It's incredibly disappointing that the Oregon Restaurant Association continues to try to lower that wage.

  • (Show?)

    Some folks in Salem are fighting tooth and nail to lower a person's income by 20 cents or more to $7.05 or less, or to put in a tip credit that the Legislature outlawed in 1977, while a CEO gets his salary raised (tripled) to a level that moves him into the top 1 percent of households. For me, the comparison puts the ORA's selfishness into perspective.

    engineer: here's some background reading on the economics http://www.ocpp.org/2003/rpt030424.pdf and http://www.epinet.org/briefingpapers/150/bp150.pdf.

  • Michael (unverified)

    Chuck I had to run off and punch the old time clock yesterday and didn't have time to finish what I wanted to say. How about we not tax anyone making less than $25,000 annually? And we eliminate the child deduction for those making over $60,000, or maybe prorate so that it declines to zero when the income exceeds $100,000. That would put more money into the pockets of low income people without having businesses pick up the burden. Michael

  • (Show?)

    Engineer said, "My understanding is that raising the minimum wage forces economically marginal companies to cut workers in order to pay for the increase-is this not correct?"

    I sure do love it when that oldie-but-goodie gets marched out. Engineer, you're an... engineer. So, let's think about this logically.

    A business is in the business of making profit. Consequently, they're going to do what they can with as few staff people as possible. Generally speaking, every business already runs with as few people as they can get by with.

    So... if the minimum wage goes up, a business has a choice to make: either pay people a bit more (a nickel, a dime, a quarter) and continue to profit from their labor, OR get rid of a staff person and lose all the profit from their labor.

    In other words, it costs much more to get rid of a staff person (who is, after all, contributing to profits) than it is to give them a 3% raise.

    That's why Patty from the AFL-CIO can point us to stats that show no net decrease in jobs when minimum wages go up.

  • Tom Civiletti (unverified)

    Also, businesses hiring minimum wage workers compete against like businesses, so there is no competitive disadvantage. Now, rising restaurant prices might increase home-cooked meals, but maybe that wouldn't be so bad. Relax; stats indicate people continue to eat out just as much when minimum wage increases.

    As far as what is livable, I know folks making $10/hour and living quite thriftily who have a hard time. $7.XX is fine for a young, childless person living with family, but it's still pretty meager for a single parent.

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