Wage waves.

Byline: EDWARD RUSSO The Register-Guard

A NICKEL HERE, a dime there, a quarter here. Prices for gasoline, fast food, beer and other items in Oregon are being inched upward as businesses pass along the financial hit from the latest increase in the state's minimum wage on Jan. 1.

Some business owners say they also are cutting back on employee hours and will be less willing to hire extra help than before.

So far, the response of businesses has been generally mild to the latest increase in Oregon's minimum wage - the fourth in the six years. It's what lies further in the future that worries many Lane County entrepreneurs, more than their present obligation to pay employees $6.90 an hour.

Unlike past minimum wage hikes, the one approved last fall by Oregon voters ties the wage to inflation. Now the minimum wage could be raised each year.

Already burdened with steadily rising utility bills, rent, insurance and other expenses, some business owners say an annual payroll hike will be more difficult to simply pass along to customers.

And when other new expenses are thrown in, such as the road maintenance fees in Eugene and Springfield, some small business owners wonder if they will be able to survive.

"I think they (voters) opened up a can of worms," said Orie Baird, owner of three Union 76 gas stations in Eugene and one in Pleasant Hill. "It's not the big expenses that put you in the ground. It's all the little things."

Business owners who vigorously opposed past minimum wage hikes are aware that they may be seen as Chicken Littles. However, they say rising overhead - combined with flat or declining sales in the soft economy - will push some of them out of business, and force others to change the way they operate.

Independent gas station owners have been under financial pressure from shrinking profit margins on gas, and by customers defecting to grocery and discount stores that sell fuel. Baird says some station operators called it quits after past minimum wage hikes.

"I used to make the same (profit) at one station as I do now with four," Baird said.

Most of Baird's 35 service station employees got pay raises Jan. 1 because Baird pays them minimum wage. After taxes, a full-time employee brings home about $11 a week more than before, Baird said.

"I haven't really noticed the difference in my check," said Ben Chase, 22, who pumps gas for Baird at the Glenwood 76.

Meanwhile, Baird's personnel costs have shot up $2,300 a month. That covers the 40-cents-an-hour hike plus increases in payroll taxes for federal and state unemployment coverage, Social Security, Medicare, and Lane Transit District fees.

To cover the added expenses, Baird mimicked his competitors and raised gas prices a nickel or so a gallon at three of his stations. Last week, Baird was ready to raise prices as soon as a rival near the fourth station boosted prices.

Baird also increased the cost of soda, candy and other snacks sold at the stations between a nickel and 15 cents an item.

Between 70,000 and 100,000 Oregonians are paid the minimum wage, or about 4.5 percent of the work force. Many work at fast-food stores or other eateries, or at gas stations or convenience stores.

Business groups that employ many of these workers this year will try to persuade the Legislature to change the minimum wage law.

The Oregon Restaurant Association, for example, wants to repeal the annual inflation adjustment. As in past sessions, the ORA also wants employers to be able to count workers' tips as part of pay, and for minors to be paid 50 cents an hour less for a two-month training period.

Some restaurant owners aren't waiting for help from the Legislature to cut costs.

Chuck Roseberry, owner of the Busy Bee Cafe in Springfield, has servers earning between $6.90 and $8 an hour, plus tips. He said he has cut back employee hours to hold down expenses.

Before the latest pay hike, for instance, two servers might have worked during relatively slow periods.

Now "one good one can do the work of two, so I cut one out" Roseberry said. "It makes it harder on them (the one server), but if they are good enough they can make it anyway."

With the pay hike, Oregon is tied with Connecticut for the third highest state minimum wage in the nation behind Washington, at $7.01, and Alaska, at $7.15.

Inflation at work

Oregon's law requires the wage to be adjusted each year for inflation. Each September, the commissioner of the state Bureau of Labor and Industries will adjust the wage based on the Consumer Price Index for the previous 12 months.

Consumer prices from 87 of the nation's largest metropolitan areas, including Portland, will be used to determine the inflation rate.

In the past five years, the average annual increase has ranged from 1.6 percent to 3.4 percent, said Art Ayre, an economist with the state Employment Department.

Washington state annually adjusts its minimum wage. Based on CPI data, the state raised the wage 1.6 percent on Jan. 1.

Some business owners say the annual adjustment will contribute to inflation in Oregon.

However, Ayre said, the rising minimum wage could lead more people to seek jobs, both state residents and those who might move from other states. By having to pay higher wages, employers might hire fewer people, he said.

"The net effect is more people looking for work than would otherwise be the case," Ayre said. "Rather than push up inflation, it could push up unemployment."

Yet Ayre said it's hard to tell whether the lure of higher minimum wages would create enough new job seekers to affect the state's overall unemployment rate, which stood at 7.1 percent in November.

Other Lane County businesses that employ minimum wage workers have responded to the wage increase. Here are a few examples:

Most of Burger King's 317 hourly employees in Lane and Douglas counties were affected by the minimum wage increase. Franchise owner Mohawk Associates Inc. of Eugene boosted some of those workers to the new minimum wage and boosted others above it. For those employees already above the new minimum, Mohawk said it gave pay raises of between 10 cents and 40 cents an hour.

These workers "had already proved themselves and showed they were worth more money, and we didn't want to lose them," said Micki Waters, Mohawk's vice president of marketing.

Mohawk boosted food prices slightly, she said, but Mohawk's owners declined to specify what went up and by how much.

The wage hike has increased expenses at each of the 60 Taco Time restaurants in Oregon between $500 and $1,000 a month, said Dave Glazier, vice president of operations at the chain's Eugene-based parent company, Taco Time International.

In response, Taco Time has raised drink prices an average of six cents, and hiked the price of other items, such as the chicken soft taco, by 15 cents to 20 cents, Glazier said.

"We tried really hard to hold the line," he said, so the price increases would not exceed what it took to cover the extra payroll expense.

The restaurants did not lay anybody off because of the wage hike, Glazier said. But, he said, managers probably will wait longer to hire new workers.

Pay gap shrinking

With the minimum wage probably going up each year, Glazier said, restaurant managers might be less willing to hire inexperienced high school students.

Higher entry-level wages also could make it more difficult for Taco Time to give older, more experienced workers substantial pay increases, Glazier said.

With minimum wage boosts, the pay differences between entry level and veteran employees are shrinking, he said. "There are only so many dollars allowed toward labor," Glazier said. The minimum wage increases "really puts a cap on the top wage that you can pay your more experienced workers."

Thistledown Farms, a produce farm and market north of Eugene, will not feel the minimum wage hike this year because its clerks and field hands make more than minimum wage, said owner Randy Henderson.

However, as the minimum wage goes up, he said, he will have to pay his workers more in order to keep them.

Henderson said he already finds it difficult to grow crops such as strawberries at much of a profit because of competition from lower-price supermarket strawberries. As payroll costs rise, Henderson said, he might stop growing strawberries or other fruits.

Business owners are not the only ones affected by minimum wage hikes. Government agencies also are feeling pressure.

Lifeguards at city swimming pools, for instance, are being paid more. In Eugene, the city's aquatics program will cut office supplies and travel to a national conference to absorb an increase of $4,000 during the next six months, said aquatics director Robert Mervine.

The city's next fiscal year begins on July 1, and the annual impact on the aquatics program will be about $8,000 over the course of a year.

His staff will look for ways to cut expenses, such as buying fewer office supplies, before cutting programs, Mervine said. He will ask the City Council to raise swimming program fees only as a last resort.

"The economics of it is that you can only absorb so many increases in expenses without it impacting service or price," Mervine said.

Drinking more expensive

Bob Jensen, majority owner of the Wild Duck Brewery in Eugene, said he is likely to raise food prices 5 percent and beer a quarter a glass.

With sales virtually flat the past four years, Jensen said he must respond to offset rising expenses, including steep increases in liability insurance since September 2001.

"Forty cents an hour more is not the straw that will break the camel's back," said Jensen, who owns the restaurant and brewpub with former University of Oregon quarterback Chris Miller. "But when you include it with the other rising costs and the economic downturn, it just becomes more acute."

Restaurateurs are among the most vocal opponents of past minimum wage hikes. Jensen acknowledged that previous predictions of financial ruin that didn't come true may make the public less willing to believe that things are so bad.

But with the weak economy, Jensen said, business owners such as himself are operating in extremely challenging times.

Long-term sales and profit trends for the Wild Duck indicate that Jensen may have to find an additional investor. "I don't intend to close," he said. "But I'll need to find some answers."

Contact Edward Russo at 338-2359 or [e-mail].

CAPTION(S):

"I haven't really noticed the difference in my check," said Ben Chase, 22, a minimum-wage worker who pumps gas at the Glenwood 76.