Raising Minnesota’s minimum wage expected to be hot issue at Capitol
ST. PAUL -- Scott Coykendall lost a $63,000-a-year job a few years ago, had one for a while at around $17 an hour, and for the past few months has worked full time at Domino’s for the federal minimum wage of $7.25.
The Robbinsdale man, 43, is divorced, sharing custody of two school-age kids, living in a two-bedroom place for $919 a month, and he’s been struggling.
He’s had to borrow money and sell some of his stuff. He’s been using the food shelf and Toys for Tots, organizations he used to donate to. He’s also been buying groceries a day or two at a time because he can’t scrape up enough for a week or two’s worth.
“We eat over at my mom’s a lot,” Coykendall said. “It’s demeaning.”
Coykendall secured a higher-paying job last week, which should help. But the experience he’s had trying to make ends meet on minimum wage is the kind of thing state lawmakers have in mind when they talk about the need to bump it up.
“Minnesota workers are working hard and not able to survive (and) support themselves,” said state Rep. Ryan Winkler, DFL-Golden Valley, sponsor of the minimum-wage bill in the House. “It isn’t really a question of how we compare to other states; it’s a question of whether people who are working full time should live in poverty.”
It’s a little more than a week till the start of the new legislative session, where Winkler and other House DFLers will continue their push for an increase to $9.50 an hour, tied to inflation, which would bring Minnesota from among the lowest minimum-wage states to among the highest.
They will face opposition from business leaders who say they cannot afford such a big increase.
Since it was put in place in 1974, Minnesota’s minimum wage roughly tracked the federal rate until 2005, according to a report last month from the state Department of Labor and Industry. Minnesota capped its rate at $6.15 in 2005, but the federal rate kept climbing, to $7.25 in 2009.
In 2013 dollars, Minnesota’s starting wage of $1.80 in 1974 would be equivalent to $8.74, the department said. In inflation-adjusted terms, the state’s minimum wage has dropped 30 percent, while the federal rate has fallen 25 percent.
Businesses warn that raising Minnesota’s minimum wage will force them to cut jobs, thereby hurting the people the increase is supposed to help. They also worry about being at a competitive disadvantage if businesses in neighboring states don’t have the same labor costs.
“I’m 10 miles from Iowa and 10 miles from South Dakota,” said Glen Gust, owner of Glen’s Food Center in Luverne. If Minnesota goes to $9.50 and the other states stay at $7.25, “my competitiveness is going to be bad,” Gust said.
Democratic-Farmer-Labor Gov. Mark Dayton has said he supports the $9.50 figure, so the challenge for Winkler and others is to get enough members in the DFL-controlled Senate to sign on.
Last session, the Senate proposed a cap of $7.75 per hour, with no escalator, and the issue died in conference committee.
Senate Majority Leader Tom Bakk of Cook said that it’s possible to get enough support for $9.50 in the Senate but that a variety of issues will need to be worked through first. “This is about a lot more than just a number,” he said.
In addition to the rate and indexing to inflation, the House and Senate differ on parental leave and overtime for agricultural workers, Bakk said.
He said he personally supports $9.50 but would want to make sure the increased rate wouldn’t put undue financial pressure on small-town nursing homes, which can’t simply raise prices to cover new costs.
“What I just want to make sure of is that when I cast that vote, if that nursing home closes, I don’t want anybody saying, ‘Well, Bakk raised the minimum wage and we lost our nursing home in our town.’ That’s critical infrastructure in these little rural communities.”
He said there may also need to be some sort of exception made for resort owners, many of them in Bakk’s neck of the woods in northern Minnesota, who bring in foreign workers for the summer and provide them with room and board in addition to pay.
Among Minnesota hourly workers making the minimum wage or less in the year ending July 2013, nearly half worked in food and drinking establishments.
Tony Boen, regional manager with Duluth-based Grandma’s Restaurant Co., said his business would support $9.50 if it were paired with what the Minnesota Restaurant Association calls a “tipped employee tier.”
In Minnesota, in contrast to 43 other states, tips don’t count toward calculation of minimum wage. That means servers can make well above the minimum — an average of $18 per hour statewide, according to a 2013 survey by the restaurant association.
In a tier system, an employee whose wages plus tips equaled at least $12 an hour would stay at the current federal minimum wage of $7.25 per hour plus their tips.
An employee whose wages and tips were less than $12 per hour would get the $9.50 plus their tips.
“So nobody goes backward, everybody’s making at least $9.50,” Boen said, and “we’re able to implement this without such an impact.”
If the rate goes to $9.50 without the tiered tip system, Boen says, Grandma’s will have to increase prices and cut jobs, which will fall heaviest on young workers.
Winkler says part of the reason to raise wages for low-wage workers is that those are the kinds of jobs the economy is tending to produce.
“If you raise the minimum wage to $9.50, 360,000 people will get a raise,” he said. That counts the roughly 83,000 Minnesota hourly workers making minimum wage but also another roughly 280,000 workers making between $7.25 and $9.50, Winkler said.
But “that money to pay people has to come from somewhere, and it usually comes from the pockets of other middle- or lower-income workers,” said Ben Gerber, manager of labor and energy policy at the Minnesota Chamber of Commerce.
The chamber is supporting an increase in Minnesota’s minimum wage to $7.25.
One challenge with raising the minimum wage is dealing with the corresponding decline in public assistance and credits.
House Research calculated in a report last spring that a single parent with two kids in 2012 who went from working full time at $7.25 per hour to full time at $9 per hour would see his or her annual earnings rise $3,640, or 24 percent.
But net annual resources would go up only $985, or 4 percent, because of corresponding steep reductions in aid from the Minnesota Family Investment Program — which provides state assistance to low-income families with children — as well as the earned income tax credit and working family credit.
“We basically have a situation in which we have a large number of low-wage jobs where people work and qualify for public assistance,” Winkler said. “We don’t want to create a situation in which working more and getting job skills and moving up the income ladder sends you off the cliff of benefits so that you have a disincentive to work more. At the same time, we don’t want to maintain the status quo where essentially the state taxpayers are subsidizing low-wage jobs.”
Coykendall says even going to $9.50 won’t give Minnesota workers enough to live on, but it’s a start. He says it should be at least $15.
His new job, at an HVAC supply company, pays $12.50, and he still plans to work part time at Domino’s for $7.25. Plus a friend will pay him $12 an hour to help out doing work on houses and lawns.
“I don’t think in America it’s a bad thing to bring up the bottom,” Coykendall said. “We’re not a bunch of complainers. But what’s fair is fair. Let’s just be just.”
Minimum wage facts
Minnesota’s minimum wage: $6.15 per hour (large employers), $5.25 (small employers), $4.90 (training)
In practice, most Minnesota workers who qualify for minimum wage receive the federal rate of $7.25.
Minnesota workers also don’t count tips toward calculation of minimum wage, so they earn tips on top of the minimum. Federal law and most states allow employers to factor tips into minimum-wage calculations.
U.S. minimum wage: $7.25 per hour.
Two states (Wyoming and Georgia) have lower minimum wages than Minnesota; one is higher than Minnesota but below the federal minimum; five states don’t specify a minimum wage. Twenty states have the same rate as the federal level; 21 states are higher.
Nearby states — Wisconsin, Iowa, North and South Dakota — are all at $7.25.
At the Capitol
The Minnesota House is pushing to raise the state minimum wage to $9.50 starting in 2015 and to index it to inflation. The Senate specifies $7.75 by 2015 and does not tie it to inflation.
Eleven states include automatic adjustments tied to inflation or other escalators.
No state has a minimum wage as high as $9.50. The closest is Washington at $9.32. California is scheduled to go to $10 in 2016.
Who makes minimum wage
From August 2012 through July 2013, 5.2 percent of Minnesota’s hourly workers received the federal minimum wage or less. (Both Minnesota and federal law exempt certain categories of workers, meaning some workers earn less than the minimum.) That equates to roughly 83,000 hourly workers.
If you count salaried workers as well, the total number earning $7.25 or less is an estimated 114,000.
For the year August 2012-July 2013, among hourly workers making minimum wage or less:
- 80 percent were unmarried
- 72 percent were part-time workers
- 65 percent lived in the Twin Cities area
- 60 percent were women
- 60 percent were 15 to 24 years old
- 47 percent worked in eating and drinking establishments, and 55 percent of those earned overtime, tips or commissions
- 20 percent lived at or below the poverty line
- Of those age 20 and older, 58 percent had at least some college
Sources: National Conference of State Legislatures, U.S. Department of Labor, Minnesota Department of Labor and Industry
The Pioneer Press is a media partner with Forum News Service.