Published Apr-5-2012
Due to a law passed in 2002, Oregon's minimum wage is adjusted every year based on inflation. Thus, when the average cost of goods increases from one year to the next Oregon's minimum wage increases at the same rate, with the new minimum wage taking effect on January 1st. The increase is calculated the prior September using August data on inflation. This advanced timeline gives the state government time to announce the new minimum wage and businesses time to plan accordingly.
At the beginning of 2012, Oregon's minimum wage rose to $8.80 per hour. This is an increase of 3.5 percent from the rate of $8.50 in 2011. While 3.5 percent seems large, it is exactly the same increase seen from August 2010 to August 2011 in the U.S. Consumer Price Index for all urban consumers - the most commonly used measure of inflation. Oregon's minimum wage is now $1.55 higher than the federal minimum wage. In the 19 states where the state minimum wage exceeds the federal rate, workers covered by both laws receive the higher state rate.
Before taxes, a full-time, year-round worker earning $8.80 an hour makes about $18,300 per year. At the federal minimum wage ($7.25), a full-time worker earns about $15,100 before taxes. In the first quarter of 2011, about 137,000 jobs in Oregon paid below $8.80 per hour, and would be affected by the rise in minimum wage.
The thresholds were originally determined in 1963 based on two factors: (1) food budgets designed by the U.S. Department of Agriculture for families under economic stress, and (2) the average portion of income a family spends on food. Like the minimum wage, the poverty thresholds are updated each year based on inflation.
In 2010, the poverty threshold for a single person was about $11,100. Single people whose pre-tax annual income was lower than this amount were considered impoverished. For a family of three (the average family size in Oregon), the threshold was almost $17,400.
An estimated 596,400 Oregonians fell below the poverty threshold in 2010. They accounted for 15.8 percent of the population. Fewer individuals (388,700) were impoverished in 2000 and they made up a smaller portion of the total population (11.6%). Oregon's increase in the rate of poverty from 2000 to 2010 followed the national trend. However, Oregon's rate was below the national average (12.4%) in 2000, but higher than the U.S. population below the poverty level (15.3%) in 2010.
About the poverty thresholds, the Census Bureau says, "although the thresholds in some sense reflect families needs", they are merely meant as one measurement, and not a complete description of how much people and families need in order to live. The Bureau also notes that some government programs use guidelines or measures other than those provided by the Census Bureau to determine the poverty status of a person or family.
While this kind of wage definition is appealing, the task of defining a living or family wage is difficult. There are many factors to consider, such as: What items are "basic necessities"? What is a reasonable average cost for things like housing and utilities? To make matters more complex, the costs for basic necessities, housing, and so forth, vary depending on location. Thus a living or family wage rate must also vary depending on location.
Despite these challenges, some governments and private entities have attempted to define a family wage. The state of Missouri, for example, has a family wage calculator online. In Washington, two private research organizations teamed up to create a report called Improving the Odds, which discusses family wages. Both the online tool and the report adjust for location and family size when calculating a family wage.
In Oregon, there is no official definition for a family wage, although the phrase is mentioned several times in the Oregon Revised Statutes. The Oregon Economic and Community Development Department (OECDD) offers one definition for a family wage: the average pay per worker covered by the state's unemployment insurance system. This "average covered wage" is calculated down to the county level in Oregon using data from the Oregon Employment Department. By definition, it is the sum of payroll from establishments covered by unemployment insurance law divided by the total number employed at those establishments. In 2010, the average covered wage was about $41,700. This was an increase of more than $900 from 2009.
A broader measure of average income is per capita personal income (PCPI), which measures the total annual income per person. In addition to earned income, it includes transfer payments from the government (like social security), interest from investments, and stock dividends. The data is gathered for each state and county.
In 2010, Oregon's per capita personal income was about $36,400. While this was an increase of almost $900 from 2009, the rate of increase (2.4%) was less than inflation from 2009 to 2010 (1.6%). So after accounting for the approximate increase in the cost of goods and services, Oregonians had less income per capita in 2010 than in 2009.
Graph 1 shows the annual change since 1990 for both average covered pay and PCPI. With the exception of the early 1990s, it appears that the two measures change similarly each year. This makes sense, as earned income is a very large component of per capita personal income. Both measures tend to exceed inflation much of the time, leading to real gains in purchasing power over time, although in some years inflation exceeds wage and income gains.
Graph 2 uses this data to show the income distribution for Oregon's households in 2010. Nearly half (46%) of all households had income between $25,000 and $75,000 in 2010. The portion of households in the highest and lowest income groups were about the same, with 8 percent of households earning less than $10,000 and 6 percent earning $150,000 or more. The graph reflects the wide range of earnings among Oregon's households.
