Testing wage theory.

Byline: The Register-Guard

Oregon voters launched an experiment in 2002 when they approved an increase in the minimum wage, with yearly adjustments for inflation. The state's minimum wage of $7.50 an hour will increase to $7.80 on Jan. 1, almost 50 percent higher than the $5.15 per hour set by national law. For four years, Oregon has tested the theory that minimum wage increases result in job losses - particularly if a lower-priced labor pool is available elsewhere.

So far, Oregon continues to enjoy a robust rate of employment growth, despite the widening gap between the state and federal minimum wage rates. It may be that job growth would have been stronger yet if the state-federal gap were narrower. If that's the case, Oregon can expect to benefit from action in other states and at the federal level that will mean larger paychecks for the lowest-paid workers.

Oregon's minimum wage is the nation's second-highest. At some point, a wide disparity in minimum wage rates might be expected to put Oregon at a disadvantage in competition with other states for certain types of businesses. Oregon does not appear to have reached that point.

It's possible that Oregon is partially shielded from employment effects by the fact that its neighbors also have high minimum wages. Washington state has the country's highest - $7.63 an hour, which will be adjusted upward on Jan. 1 to keep pace with inflation. California's is $6.75 an hour, and the rate in San Francisco is $8.50. High minimum wages have not prevented the West Coast states from having economies that are among the nation's most vibrant.

If a minimum wage disparity brings any sort of economic penalty to Oregon, it will be softened soon. Voters in six states- Arizona, Colorado, Missouri, Montana, Nevada and Ohio - voted earlier this month to raise their minimum wages. That brings to 29 the number of states that have mandated minimum wages that surpass the federal rate.

Many of the state increases may soon by superseded by an increase in the federal minimum wage. Congressional Democrats have promised an increase, and the leading proposal would raise the minimum wage to $7.25 an hour over the next two years.

Yet the disparity will not vanish. None of the six states raised their minimum wages to the level of Oregon's; Colorado, for instance, increased the lowest pay rate to $6.85 an hour, with an offset of up to $3.02 per hour for workers who receive tips. By the time the federal minimum wage reaches $7.25 an hour, inflation adjustments will have pushed Oregon's rate well above $8.

Even so, it will be several years before the gap between Oregon and other states is as wide as it is today. And if Oregon's economy hasn't been damaged by a state-federal gap of 50 percent, a smaller differential should be even easier to bear.

One explanation for the absence of economic consequences may be that Oregon's minimum wage really isn't that high - rather, the federal rate is exceptionally low. The federal rate has not been increased since 1997, and its purchasing power has deteriorated by 20 percent since then. The current federal minimum wage is equal to 31 percent of the average hourly wage of American workers, the smallest percentage in 50 years. It's not that Oregon's lowest-paid workers have surged ahead, but that workers in other states have lagged behind.