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Farmer Denver Pugh of Pugh Seed Farm in Shedd talks about how the new minimum wage law will affect his business. Pugh said farmers and other businesses may be forced to automate certain jobs as wages increase.

A new series of annual minimum wage increases – the first being a jump from $9.25 to $9.75 locally — starts on Friday in Oregon, and while low-paid workers will get a boost in income and spending power, mid-Willamette business owners are concerned.

“It’s going to impact us a lot. Half of our employees are minimum wage folks,” said Kaymarie Novak, business manager of Novak’s Hungarian Restaurant in downtown Albany.

Restaurants, farms, retail establishments and nonprofits will be the industries most impacted by the mandatory pay increases, said Patrick O’Connor, a regional economist with the Oregon Employment Department.

One result is increased labor costs will be passed on to customers, who will pay more for their meals, products and services, said Janet Steele, executive director of the Albany Area Chamber of Commerce.

“Somebody has to pay, or else businesses will close their doors,” she added.

Novak said she doesn’t have any choice about increasing the prices on her menu. “We’re in a position where we have to in order to pay our bills.”

A pint of beer will cost a little bit more at the Calapooia Brewing Co. in Albany, as well, said owner Laura Bryngelson.

She and her husband Mark Martin are huge proponents of paying people a living wage, but it isn’t just their workers who will cause increases to the budget. Calapooia also will face higher prices on goods and from distributors who deliver their beer thanks to the wage hike.

“I think it’s a great thing for people who work minimum wage jobs, but it’s going to hurt the small businesses like us,” Martin said.

At least Calapooia and Novak’s can increase their prices to compensate. That isn’t as much of an option for many farmers.

“We’re price-takers, not price-setters, so I think agriculture is going to get hit the hardest,” said Denver Pugh, of Pugh Seed Farm near Shedd.

His farm has no control over two of its biggest expenses, fertilizer and fuel, and those costs are expected to increase. If he tries to raise prices of grass seed, customers may seek other markets. “They can buy it elsewhere,” he said, mentioning Minnesota and Missouri, states that have been increasing their grass seed acreage.

He worried that some crops, such as annual ryegrass, which are just above break-even now, will become unprofitable.

Impact on jobs

Across the state, there are expected to be 40,000 fewer jobs by 2025 than would have been created absent the minimum wage legislation, according to a report by the Oregon Office of Economic Analysis.

“Our office is not predicting outright job losses, however we are expecting somewhat slower growth,” the report reads.

Likewise, O’Connor didn’t expect to see any particular spike in unemployment locally, as the job market has been so hot over the last year that many companies are having problems finding workers.

Novak and her sisters will try not to give workers pink slips, but they’ll be cutting hours and shifts.

The minimum wage will increase by steps yearly on July 1 through 2022, and there are three tiers — one for the Portland urban growth boundary; one for Oregon counties that have a mix of rural and urban areas, which includes Linn and Benton counties; and one for nonurban areas.

While the mixed areas will have a $13.50 minimum wage in the summer of 2022, the Portland tier will be at $14.75, and the nonurban areas at $12.50.

The next year, the state will start adjusting the minimum wage in all tiers for inflation.

Pugh said his five summer workers get paid slightly more than minimum wage, but his full-time employees earn much more — right around $13.50 to start.

“When we get to 2022, it will make a huge difference. … It’s hard to justify paying part-time summer help that much money for a job they’re trying to learn,” he added.

Across the state, the minimum wage increases are expected to affect 203,000 jobs, according to an Oregon Employment Department report released in April.

Linn and Benton counties currently have at least 10,700 workers at or below the new minimum wage of $9.75, the report states.

The report used figures from April 2015, and theorized that the counties would have slightly higher figures now, as unemployment has dropped and there are more laborers in the workforce in general throughout the state.

With the April 2015 figures, workers at or below the upcoming minimum wage accounted for about 12.2 percent of the 87,607 residents employed in Linn and Benton counties.

As of May 2016, there are 98,283 workers in the mid-Willamette Valley. If the percentage stayed true, there would be about 12,000 jobs that currently pay $9.75 or less in Linn and Benton counties.

An additional complication will arise, however, because many other employees will get raises, as well, O’Connor said. “Lead workers are probably not going to be staying at $9.75,” he added.

Novak said that she feels obligated to increase wages for all of her staff, particularly so newer employees aren’t making as much as more experienced workers with more responsibilities.

“We don’t want resentment to build up,” she explained.

Novak’s Hungarian Restaurant allocates about 30 percent of its budget for labor, including taxes and insurance, Novak said.

She added that the restaurant decided to move to downtown Albany to downsize and lower overhead costs in part because of the minimum wage increase. “This has been talked about for three or four years and we saw the writing on the wall,” Novak said.

When she and fellow area restaurateurs went to Salem to testify about the minimum wage increases, they were met with deaf ears, Novak said.

“It just seemed like an ideological decision rather than something based on economics and math. We have to operate in the real world and politicians don’t,” Novak said.

Steele said that the minimum wage increase has been coupled with paid sick leave and other issues that are forcing business owners to pay more for labor.

She added that the minimum wage isn’t meant to be a family wage. “It is meant to give people the first opportunity for a job,” Steele said.

Another impact of the minimum wage increase, according to Novak and the owners of Calapooia Brewing, is that customers at fast-food restaurants and other business will see more self-serve kiosks.

National chains are switching to the machines because they are cheaper than actual human laborers working the cash registers, they said.

And that trend may continue into agriculture, Pugh said, as certain aspects of farming can become more automated.

Big seed companies, for example, are already using robotic baggers.

“It’s a huge expense, but you pay it one time,” Pugh said. “Most (farmers) don’t want to do it. We want people. But with the cost of minimum wage, who knows what direction people will go?”

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Kyle Odegard can be reached at kyle.odegard@lee.net, 541-812-6077 or via Twitter @KyleOdegard.

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Business Reporter