Employers on state borders weigh location costs

The growing minimum wage differential between Oregon, Washington and Idaho hasn’t led to sharp changes in business on the border. As the minimum wage in the neighboring states of Oregon and Washington has risen, while Idaho’s has remained unchanged, some thought businesses would leave higher-cost states for Idaho. But while some companies are moving, their reasoning is more nuanced than simply wages.

The minimum wage in Washington rose to $11.50 on January 1 and will increase to $10.75 in Oregon outside of Portland on July 1. The minimum wage has been unchanged in Idaho at $7.25 since 2008. Although some business owners said they have moved to Idaho because of the lower wage, companies general take many more factors into account than wages when contemplating the best place to locate, said Karl Dye, president and CEO of Valley Vision Inc.,  the Lewiston-based regional economic development agency covering Lewiston, Clarkston, Asotin County in Washington, and Nez Perce County in Idaho.

Dye said companies sometimes use consulting services to weigh factors such as taxes, regulation and workmen’s compensation rates.

For example, while Idaho has a lower minimum wage, Washington doesn’t have an income tax, though it does have a business and occupation (B&O) tax, Dye said. Depending on the type of business, the B&O tax can range from 0.47 percent for retailing to 1.5 percent for “services and other activities,” according to the Washington State Department of Revenue. “I don’t know that minimum wage changes have affected the relationship,” he said.

Minimum wage is less of an issue than regulatory and governmental issues, said Shay Myers, general manager of Froerer Farms Inc., in Nyssa, Oregon. After the winter of 2016-2017, where four of the company’s onion sheds collapsed under the weight of unusually heavy snowfall, the company chose to rebuild in Idaho, partly because of the lower minimum wage. But especially with today’s tight labor market in both states, the minimum wage differential is less of an issue, particularly in comparison with three or four years ago, he said. “You’re paying nowhere near minimum wage in Idaho,” Myers said.

Other factors also made Oregon less attractive. “It’s a harder state in general to do business with,” Myers said. For example, Oregon employers are required to provide workers with one week’s paid time off for sick leave, he said. And when the company was faced with having to rebuild its onion storage facilities in less than nine months, Oregon’s land use laws made that more difficult than in Idaho.

“When it came down to it, Idaho was very willing to do everything they could to speed up the process,” he said. Moving to Idaho also meant the company could apply for a Tax Reimbursement Incentive, though he wasn’t sure whether it had received one yet.

On the other hand, after a number of companies like Myers’ left, Oregon started to pay attention, he said. “They’ve taken some significant steps to soften the blow of these regulatory challenges that are different between Oregon and Idaho,” he said. For example, while Oregon raised its minimum wage

again, it approved a gradual increase with a lower minimum wage in rural areas like Nyssa, he said. The state is also adjusting its land use policies to make it more competitive, he added. “I have to recognize the steps and efforts they’ve made to make policies fair and equitable and reduce collateral damage to the rural part of the state,” he said. “They have really stepped up and tried to make a difference.”

In some cases, other factors influenced the company’s location decisions. “We’ve taken our sweet potato operations that were in Weiser, where we can’t get labor, and moved them to Oregon,” Myers said. With workers coming from as far as Marsing, Caldwell, and Kuna, Weiser was just too far away, he said.

In retail, some multistate companies considered Boise before larger cities such as Seattle and Portland. However, that’s also due to the higher cost of land in those larger cities, as well as the lower wages. For example, while the Garden City-based Gyro Shack has locations in Boise, its Washington locations are outside Seattle because of the high cost of land there.

And some people live in Washington and work in Idaho, Dye said.

“In the past, jobs were created by Clearwater Paper and Potlatch,” as well as sawmills in both states, he said. “There’s always a mix and a blending across the border.”