With minimum wage rising across the Midwest, North Dakota stands pat
Twenty-six states — including Minnesota, Montana and South Dakota — are set to increase their minimum wage in 2022. Meanwhile, minimum wage holds steady at $7.25 per hour in North Dakota. While business advocates say the status-quo is working, labor leaders say its time for a change.
FARGO — Minimum wage is on the rise throughout the upper Midwest, just not in North Dakota.
According to a recent Axios report , 26 states will increase their minimum wage in 2022. Those states cut across the political spectrum, including typical Democratic strongholds such as California, Illinois, Massachusetts and New York as well as conservative-minded states like Florida and Missouri. The picture is similar locally, where progressive-leaning Minnesota is joined by Republican counterparts Montana and South Dakota in raising their minimum wage.
Meanwhile, minimum wage in North Dakota remains constant at the federal rate of $7.25 per hour, as it has since 2010 .
Over the last 12 years, minimum wage in North Dakota has been falling behind its neighboring states . Minnesota, Montana and South Dakota all make annual adjustments to their minimum wage according to inflation. Montana jumped ahead of North Dakota’s $7.25 per hour mark in 2011, while Minnesota and South Dakota followed in 2014 and 2015, respectively.
Labor leaders fear it's a troubling trend for the state and a sign that lawmakers are leaving the lowest earners behind. Business advocates argue that the free market has done just fine in regulating wages in the state.
In 2021, the North Dakota Legislature widely favored the business side of the issue when the House of Representatives overwhelmingly voted against a plan to increase the state’s minimum wage to $15 by 2027 . With the Legislature currently in an off year, labor activists will have to wait until 2023 to make headway and break through the 82-12 margin that blocked last year’s proposal.
'It's well past time'
The 12 years since North Dakota’s last minimum wage increase has been far too long, the state’s AFL-CIO President Landis Larson said. “I think it’s well past time and it needs to be raised,” he remarked. “It’s not like everything else isn’t going up.”
Larson’s efforts to persuade the North Dakota Legislature have fallen short in recent years, however. In 2019, the push to raise the minimum wage in North Dakota took a step backwards when the Legislature passed a bill prohibiting local municipalities and counties from setting their own “living wage” above the state’s minimum wage.
While the defeat of last year’s bill didn’t come as a surprise, it was indicative of what Larson views as a negative development in the Legislature’s political composition. “What I see in the Legislature is the Republican Party is turning more right-wing, so I think it’s just going to make it that much more difficult to get anything like that passed,” he commented.
Ultimately, Larson feared that North Dakota would have to take the same path as its southern neighbor to raise its minimum wage. In 2014, South Dakotans backed a ballot measure to link annual minimum wage increases to the Consumer Price Index . “I think that’s probably the way it’s going to have to be done in North Dakota,” he said.
Between bringing various groups together to draft a proposal, compensation for signature-gatherers and a marketing campaign, though, a ballot measure would be “an expensive proposition,” Larson explained. Still, he believed it may be the only way to lift the minimum wage in North Dakota. “I’m afraid it's going to take a petition drive with citizen initiative,” he said.
One such group would be the North Dakota Chapter of the National Association of Social Workers, which also backed the 2021 proposal to raise the minimum wage.
Kristin Rubbelke, NASW-ND’s executive director, shared Larson’s assessment that a minimum wage increase is overdue. The current $7.25 rate “is not suited to sustain a person working 40 hours a week,” she said via email.
“Since the national minimum wage has not seen an increase since 2009, many states are taking the opportunity to raise this protection in their own states,” she continued. “The North Dakota Chapter of NASW supports this push and encourages North Dakota to raise the minimum wage to a livable wage.”
'You see the effects of the free market at play'
Opponents of minimum wage increases in North Dakota have a simple explanation for their stance. The free market, they say, is working exactly as it should to boost wages.
Arik Spencer, CEO of the Greater North Dakota Chamber, said supply and demand are working to drive wages up without government regulation. “The Greater North Dakota Chamber, not unlike a lot of business groups, is opposed to setting a minimum wage in law and the reason is that we think the free market should dictate what wages are,” he said. “For the most part in North Dakota, we absolutely see that working. The average wage in North Dakota is around $23 an hour.”
Look at any hiring sign across North Dakota and you’ll see evidence that wages continue to climb. Starting wages statewide are “far above what minimum wage is,” Spencer said.
In Fargo, there’s evidence to back Spencer’s claim. Unskilled positions, particularly in the service industry, routinely advertise wages north of $10 per hour, with some fast food jobs even paying more than substitute teaching positions . “Just driving down the street, you see the effects of the free market at play, that the labor shortage is certainly driving wages up,” he said. “That’s not a new phenomenon. We’ve seen that for years in our state.”
Alison Ritter, North Dakota State Director for the National Federation of Independent Business, echoed Spencer’s sentiment, saying compensation increases should be left up to businesses rather than handed out through legislation. “Overall, the NFIB opposes any sort of mandatory minimum wage increase,” she said. “Generally when it comes to mandates, it’s up to the small business to decide when it comes to raising compensation.”
Small business surveys in North Dakota have found that NFIB members are already raising wages on their own accord, she said.
National research has mirrored this trend, Ritter added. A December report found that 48% of businesses said they’re raising compensation, a 48-year high, while 32% plan to do so in the next three months. “Especially in North Dakota, being that there are so many job openings, employers have to find a way to get competitive and attractive,” she explained. “From what I’ve seen and been told, actually offering the minimum wage doesn’t happen very often.”
A boost for the state economy
Larson said the $7.25 minimum wage creates an image problem for North Dakota. This becomes particularly apparent, Larson added, when comparing the Peace Garden State to its neighbors.
Out-of-state workers comparing North Dakota to its peers could use the minimum wage as a proxy for how the state views employees. “I think it’s just kind of a measuring stick,” he commented. “It would be just a measure of what the general pay would be to me. You could look at it as how they treat their employees or how the Legislature looks at workers.”
According to a report from the Bureau of Labor Statistics , 3,000 employees in North Dakota were paid at or below the minimum wage in 2020. Despite this, Larson believes the Legislature is unconcerned about these workers. “I don’t think the Legislature cares what the optics are. In their mind, people are making more than that,” he said.
Larson figured that the relatively small number of workers in North Dakota being paid the minimum wage would mean raising the minimum wage would only come at a small cost to businesses. “I don’t see that raising the minimum wage is going to be such a huge cost in North Dakota,” he said.
Both Larson and Rubbelke agreed that raising the minimum wage would provide a boost to low-income households. “With a minimum wage of $7.25 per hour, North Dakota is not creating the needed foundation for North Dakotans to thrive,” Rubbelke said. “Increasing the minimum wage means workers in North Dakota would be paid a rate that would ensure they could pay bills and feed their families. Creating a minimum wage that reflects a livable wage would give families this security.”
Rubbelke cited data from MIT’s Living Wage Calculator , which determined that the living wage for a family of four with two working parents would be $19.20 per hour.
In addition to financial stability, Rubbelke said an increased minimum wage would inject more money into the economy. “An increase to the minimum wage allows for lower-income residents to accrue discretionary income, which ultimately leads to discretionary spending,” she said. “This is a pillar for economic strength at the local, state and national level.”
Inflation in play
Spencer and Ritter both voiced concern that a higher minimum wage would only exacerbate current inflation conditions.
With inflation hitting a 40-year high in 2021 , Ritter said raising the minimum wage would only contribute to a detrimental “cycle” of price increases for consumers. “An employer has to account for that mandatory rise somewhere,” she said. Those price increases are “never good in the inflation-type market that we’re in,” she added.
The job market has tilted in favor of employees throughout the COVID-19 pandemic, Spencer noted. “We’ve seen the market, especially during the pandemic, tip to favor workers right now,” he said.
As businesses have scrambled to fill positions throughout the ongoing labor shortage, wages have risen, a contributing factor to inflation. “Wage pressure along with supply chain issues are driving prices up,” Spencer said. “Nonetheless, there are a whole variety of industries right now where we’re seeing wages go up.”
To offset these rising costs, prices will increase or jobs will be cut, Spencer and Ritter both agreed. “Typically, that’s what happens when there’s a mandatory minimum wage increase,” Ritter argued. “You can find hours cut, actual job openings cut and then you’ll find prices of goods increase.”
Spencer said this cost-cutting effect could manifest through consolidation, driving businesses to reduce positions or close locations. “Increasing the minimum wage doesn’t mean that everyone’s going to get a raise,” he said. “Sometimes there are issues that arise that reduce the number of job openings in a community.”
On top of that, Spencer said, raising the minimum wage would lead to company-wide wage disparities by bringing pay scales closer together. “It’s not just the low-end earners who get bumped. Employers try to provide different pay rates for different levels of skill within an organization,” he remarked. “You see that compaction in terms of lower earners getting closer to mid-tier earners. There’s pressure to move those up and there’s a trickle effect from that.”
Future battles looming
In all likelihood, minimum wage will again be a topic of discussion in 2023 in Bismarck.
Whether or not the rate is increased will depend on the outcome of this year’s election, Larson figured. If the minimum wage question does arise, the labor side will face an uphill climb to oppose businesses in favor of keeping the status quo.
According to Ritter, a 2019 poll of NFIB members in North Dakota found that 77% opposed a minimum wage increase. The NFIB only takes a policy position when 60% of members vote a given way on an issue, she said, signaling that a strong majority of businesses are intent on keeping things as-is. “It’s not just some people representing an organization taking a position, but it is the actual position of our members based on how they’ve voted,” Ritter said.
Both Spencer and Ritter said the market is working well to put more money in employees’ pockets. Any policy changes would negatively impact businesses, they said.
“Each small business is different, so having that mandatory level is going to impact each business so differently,” Ritter said. “One-size-fits-all policy doesn’t work well with small business.”
Spencer also feared the ramifications a minimum wage increase would have on smaller and rural businesses. “Even though the vast majority of employers across the state may not feel the pressure directly, there are employers in maybe rural areas that will feel that pressure,” he said. “It’s something that needs to be really carefully considered before lawmakers go down that path.”
Meanwhile, Larson and Rubbelke argued that change is needed soon to safeguard employees. In their eyes, a boost is long overdue.
Due to rising prices for consumers, the state’s minimum wage workers see the value of their paychecks continually decrease, Larson said. “The minimum wage workers in North Dakota are definitely going behind every year,” he commented, adding that indexing minimum wage to inflation would combat this.
For Rubbelke, the issue boils down to choosing people over politics. “North Dakota takes care of its residents. We also take pride in the hard-working characteristics attributed to North Dakota workers,” she said. “The issue needs to become more about protecting workers and families, and less about partisan politics.”