Minimum wage deal raises state rate from one of the lowest in the U.S. to one of the highest.
Senate Majority Leader Tom Bakk and House Speaker Paul Thissen, right, in back, announced agreement on raising the minimum wage to $9.50 per hour by 2016. Minnesota’s rate, one of the lowest in the nation now, eventually will be among the highest.
Minnesota’s minimum wage is set to jump from one of the lowest in the nation to one of the highest, promising a better standard of living for more than 350,000 workers but raising bottom-line concerns for some business owners.
Democrats who run the Legislature said Monday that by the end of the week the House and Senate will pass a proposal that’s been one of their party’s top legislative priorities this year. Once it becomes law, the minimum wage for businesses with more than half a million dollars in annual gross sales will rise in three successive steps, starting this August, from the current $6.15 an hour to $9.50 by 2016.
In 2017, the minimum wage would begin to rise automatically with inflation, up to 2.5 percent a year. That could mean a jump of 24 cents in 2018, and similar raises in successive years. “I look forward to signing this legislation into law,” Gov. Mark Dayton said in a statement released Monday. Boosting the minimum wage has been a major Democratic goal in St. Paul and Washington, where President Obama has called for a federal minimum of $10 per hour and exhorted employers to raise minimums of their own accord.
The issue has been heavily supported by the party’s allies in organized labor and other left-leaning groups, and is popular among Minnesotans.
More than 350,000 Minnesota workers are paid less than $9.50 an hour, many of them in greater Minnesota, according to the Minnesota Department of Employment and Economic Development.
Sandra Miranda, who makes $9 an hour cleaning the Target store in Shakopee, is among those who welcome the increase.
“I have a 3-year old daughter and it’s just me who cares for her,” said Miranda, who works several jobs to make ends meet. “With the wage I have been making, it’s not possible to do that well.”
The eventual increase to $9.50 an hour would not be enough to allow her to move from the apartment she now shares with a roommate, but, she said, it might be enough to buy more fresh fruits and vegetables and less macaroni and cheese and other boxed dinners. Boosting the minimum wage is good, she said, “But I hope it continues to go up.”
Dave Walia, a project manager for Nath Companies, said the wage hike will have a major impact on the hospitality business. Nath owns restaurants ranging from fine dining to fast food in Minnesota.
Walia said none of their dishwashers or cooks earn less than $10.50 an hour, but paying their tipped employees $9.50 an hour will hurt.
With tips, they can now earn $22 an hour but “those are the people that [are] going to get this raise,” he said. Extra labor costs could translate into price hikes, or more work for current employees and fewer hours for some, he said. Combined with rising health care costs and other new regulations, he said, “You are really looking at a very bleak outlook for hospitality.”
House Democrats and Dayton were the driving force behind the inflation index. Senate Democrats were more reluctant, calling the automatic hikes potentially harmful to small, locally owned businesses.
The resolution resolves what had threatened to be a sticking point as party leaders try to dispatch with issues that could complicate a smooth end to the election-year legislative session.
Senate Majority Leader Tom Bakk, DFL-Cook, said Monday that the negotiations produced a handful of exemptions to cushion the blow on businesses.
“I think we tried as best we [could] to mitigate the impacts of that,” Bakk said.
Those include a three-year phase-in to get to $9.50. The first increase would come this August, when the minimum climbs to $8, then $8.50 by next August and finally $9.50 in August 2016. In addition, the state can halt the increases if there is a substantial downturn in the economy.
There also is a lower minimum wage for smaller businesses, defined as those grossing less than $500,000 annually. Their minimum would be $7.75. That wage would also apply to workers on J1 foreign visas; those aged 16 and 17, and for those aged 18 or 19 during a 90-day training period.
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