Dismay with new pay

With prices of all sorts going up, Downtown Grounds barista Laura Ferrara welcomes the boost her paycheck will get Jan. 1 when Oregon's minimum wage increases to keep pace with the rising cost of living.

"That will make a huge difference," she said of the 45-cent bump — the largest seen since voters in 2002 approved an annual adjustment linked to the consumer price index.

However, Ferrara, a 29-year-old who works part time at the coffee shop in downtown Medford while studying massage therapy at Rogue Community College, worries the raise for her and her two co-workers will be just one more financial challenge facing her boss.

"It will be a compounding charge with all the other price increases I see from vendors and utilities," Downtown Grounds owner Nichole Toney said. "I get two or three notices every month of increasing prices. This is just one more I hope I don't have to pass on to customers."

She said she has raised her shop's prices only once since opening two years ago, but the hike came in the past year and she doesn't want to have to increase prices again so soon.

Soaring consumer prices spurred the increase in minimum wage. Measure 25, passed in 2002, mandated that the state's minimum wage be adjusted annually for inflation, as measured by the consumer price index. The Bureau of Labor and Industries makes the adjustment each September, and the new wage takes effect Thursday.

Between August 2007 and August 2008, the consumer price index climbed nearly 5.4 percent, so the minimum wage will move up in concert with that, rising to $8.40 from $7.95, the bureau reported.

"That was a peak of year-over-year inflation," said Guy Tauer, regional economist at the state Employment Department office in Medford.

He noted that high summer fuel prices had pushed up costs on a variety of goods at the time the law sets for the minimum wage adjustment. Since then, the economy has slowed, and energy prices and overall inflation have dipped. In November, for example, the index was up just 1.1 percent from a year earlier.

"Now inflation has slowed and businesses have fairly high increases to deal with," he said. "It's really a challenge, especially for those that have many low-wage workers," such as retail, restaurants and hotels.

"It's part of doing business," said Ron Roth, a longtime Ashland restauratuer who owns Geppetto's with his wife, Kathleen McMichael. "As the operator of a small business, I must look carefully at how many people are needed on this breakfast shift, this lunch shift, this dinner shift," he said.

Servers, some dishwashers and teenage trainees in part-time positions all earn minimum wage at Geppetto's, but many of the professionals in the kitchen have been there for years and earn more, Roth said.

The minimum wage hike will increase costs for his and other full-service restaurants at a time when owners are trying to control costs for food, energy and other supplies, he said.

"Right now it's difficult to raise prices," Roth said. "The public is so price-conscious."

Restaurants are a prime example of businesses strained by the wage increase and current economic conditions, said Jessica Nelson, a Salem-based employment economist with the state Employment Department.

"People are eating out less, but restaurants have to pay more for employees," she said. "More revenue is needed and it's just not projected, so it's sort of a vicious cycle."

Usually in times of economic weakness, more people chasing fewer jobs keeps wages low, but this adjustment — which is especially steep and at a tough time — causes something of a disconnect, Nelson explained.

She expects employers to say they will hire fewer people in the coming year. The mandated increase at the lowest wage levels might leave less money for other raises, too.

"That adds to the feeling of angst that we aren't getting anywhere," she said, noting that in the current job market dissatisfied workers are unlikely to quit and seek work elsewhere.

Employers have a few release valves, most likely cutting hours or positions as the minimum wage rises, Tauer said. However, specific long-term effects are hard to predict, with business owners often making dire predictions that don't come true.

At Downtown Grounds, Toney said she has cut employee schedules, sought the best prices on supplies and even adjusted the products she uses in an effort to save money.

"We'll see what happens," she said. "I'll try to absorb the cost, but we'll have to evaluate again in a few months."

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