If you’re wondering how Oregon’s recent decision to increase the minimum wage will play out in the real world, you might take a look at the decisions facing the state’s public universities.
As you might imagine, Oregon’s four-year universities employ thousands of students in a variety of jobs, and a lot of those jobs pay the minimum wage.
Oregon State University alone has nearly 8,000 positions intended to be filled by student workers. (The actual number of students working might be different, because some students might hold more than one of those jobs.) Roughly half of those positions pay less than the $9.75 an hour minimum wage that will click into place beginning July 1.
Of course, that’s just the first increase: By the time the wage hikes approved by the Legislature are fully in place, the minimum wage in Benton County will be $13.50 an hour. In the state’s rural areas, the minimum wage will be $12.50. In the Portland metro area, the minimum wage will be $14.75.
OSU is in a unique position among the state’s universities in that it has employees in all three of those areas. One decision OSU officials will need to make is whether to pay all of its employees at the higher Portland rate; this mirrors the sort of decision that statewide private businesses will have to make in the next few years.
OSU officials say the increases in the minimum wage will cost the university an additional $4 million (including payroll taxes) in the two-year budget cycle that begins in 2017. And that’s just the start: For the 2019-21 budget cycle, the estimate rises to $8.6 million, again including payroll taxes.
How will universities find the extra money to pay for the wage increases? University officials across the state say they’re still weighing their options.
The problem is, they don’t have all that many options — especially considering that they hold out little hope for additional state funding in the 2017-19 budget cycle, since the state will be trying to figure out ways to pay for the obligations incurred by the Public Employees Retirement System.
But, really, the universities have basically two choices, and they are remarkably similar to the options that will be available to private businesses in the next few years: cut back the number of student jobs and the hours available for students to work, or find the revenue to cover those additional costs. (Of course, the mostly likely scenario would have the universities combining those two actions.) And where will universities turn to generate additional money, especially if it’s not going to come from the state? One possible answer: tuition.
Already, early estimates from OSU suggest it might need to trim as many as 700 student jobs.
Of course, students who did manage to hang onto their jobs would be paid a higher minimum wage — but they might find that higher tuition will take a big bite out of those increased paychecks. Workers for private businesses may well find themselves in a similar situation, as they find that their bigger paychecks don’t buy as much as they thought.
So let’s summarize: For universities, it appears that the increase in the minimum wage could result in fewer jobs for students — and higher prices, in the form of increased tuition. We often joke about how insulated the ivory towers of academia can be from the real world, but this looks like a case in which the campus experience will foreshadow what happens in the private sector. (mm)