State boosts minimum wage.

Byline: Sherri Buri McDonald and Joe Mosley The Register-Guard

Sure, 25 cents per hour is peanuts. It's barely pocket change. It fits comfortably into the "don't spend it all in one place" category.

Unless you're paying that much more to 10 employees, or 20 or 100. And your business already is operating on a tight margin. And that 25 cents is a state-mandated hourly raise. And it's added to a minimum wage that already is the second- highest statewide minimum in the nation.

"All businesses have to be smarter and more efficient, with these kind-of forced increases in cost," says Valley River Inn general manager Chris Otto, who will be bound legally to give raises to more than half of the employees at his Eugene hotel and restaurant starting Sunday.

The new year will begin happily for a total of 130,000 minimum-wage earners around Oregon, as the state-required lower limit for hourly employees goes to $7.50 from the current $7.25 on Jan. 1.

The raise puts a few more dollars in the pockets of the state's lowest-paid workers, but leaves some employers scrambling for ways to cut costs or raise prices in order to cover the higher labor costs.

"This isn't the first time we've gone through this," Otto says. "And what we've learned from the past is that in the budgeting process, we have to budget for this."

A 2002 ballot measure approved by voters raised the state's minimum wage from $6.50 to $6.90 in 2003, and required adjustments linked to inflation every year thereafter.

Some groups have praised Oregon's minimum wage standards, which they say improve the lot of low-wage working families without hurting the ability of businesses in the state to add new jobs.

An analysis released on Friday by the Oregon Center for Public Policy, a Silverton-based think tank that advocates for low-income people, indicates that Oregon has added jobs at a faster pace than 41 other states in the three years since its voter-approved minimum wage increases first took effect.

"Contrary to the doomsday predictions of minimum wage opponents, Oregon's annual cost-of-living adjustments in the minimum wage have been compatible with solid job growth," said Michael Leachman, the agency's policy analyst.

Oregon's restaurant and agricultural industries have been the most vocal opponents of the state's rising minimum wage, arguing that it forces employers to hire fewer workers and shrinks the pool of jobs for teenagers.

Many Oregon fast food restaurants have eliminated jobs and turned to self-service, said Bill Perry, director of government relations for the Oregon Restaurant Association.

The state-mandated increases also have created pay disparities among restaurant staff, Perry said. Oregon restaurants are required to extend the minimum wage to servers, whose pay is often increased by tips from customers.

The restaurant association advocates introducing a tip credit in Oregon, which would count servers' tips toward the minimum wage, Perry said. That proposal has never made it into law, however.

Owners of several Oregon restaurants said a higher minimum wage means higher menu prices for customers.

"It just ends up getting passed onto the consumer," said Josh Keim, owner of Lucky Noodle and Ring of Fire in Eugene. Each restaurant has about 50 employees - half of them paid minimum wage, he said.

Keim said he raised prices on a few dishes at Lucky Noodle early this month, in anticipation of the minimum-wage hike and to cover fuel surcharges by food vendors. He said he'll probably have to raise prices at Ring of Fire, too.

Lori Reader, co-owner of Pegasus Pizza in Eugene, did the same thing for the same reasons back in September. She said she'll wait a month before deciding whether to raise prices again. But it's hard when other costs are rising, too. This week, the restaurant's beer and Pepsi Cola distributor gave notice of a price increase at the start of the year. With the higher minimum wage and higher beverage costs, "I kind of got the one-two punch," she said.

"It all affects the bottom line, Reader said. "It affects your profitability."