Minneapolis is poised to join about a dozen cities by pushing its minimum wage sharply upward. And in that group, it stands out for another reason — it's by far the cheapest place to live.
Minneapolis ranked 54th among U.S. metropolitan areas for the cost of living, according to first-quarter data by the Center for Regional Economic Competitiveness, an Arlington, Va., research group.
The city's cost of living is slightly higher than the national average, the group's data show. But it is 30 percent lower than Seattle, which is the next-cheapest city to have adopted a $15 minimum wage.
The wage ordinance the Minneapolis City Council is scheduled to vote on Friday would require larger businesses to implement the $15 minimum wage by July 1, 2022. Small businesses, those with fewer than 100 employees, would have until 2024 to implement the minimum wage.
Currently, state law requires large Minnesota businesses, those with annual revenue exceeding $500,000, to offer a minimum wage of $9.50 an hour. For the rest, minimum wage is $7.75 an hour. The national minimum wage is $7.25 and was last raised in 2009.
Other cities that have raised the minimum wage to $15 — New York, San Francisco, Los Angeles, Washington — all rank among the 10 cities with the highest cost of living. Chicago, the most expensive place to live in the Midwest, has raised its minimum wage to $13.50 and was ranked 24th in cost of living.
The research group's cost-of-living index measures relative price levels for consumer goods and services in metropolitan areas, using the geographic definitions of the government's Office of Management and Budget.
California leads U.S. states with a minimum wage of $10.50 and is scheduled to lift it to $15 in 2022. Several California cities, particularly around San Francisco and Silicon Valley, are pushing to the $15 threshold as soon as next year and will move higher than that because they have tied wage increases to an inflation index.
Larry Jacobs, a political scientist at the University of Minnesota, said the risk for Minneapolis is that, as a lower cost-of-living city, the relatively faster jump to the $15 level will lead to a slowdown in job growth and decisions by businesses to work in the suburbs instead.
"The cost of doing business in Seattle is just higher because of higher cost of living," Jacobs said. "But in Minneapolis, there is a chance that $15 is going to spark an exit of businesses, or spark businesses that were thinking of moving to Minneapolis to delay that, or move their expansion to a neighboring city.
"Is the city outpricing itself compared to its competitors in other states and neighboring cities?"
Louis Johnston, an economist at the College of St. Benedict and St. John's University, said the net effect of a high minimum wage in a lower-cost city is unclear. Workers in Minneapolis will clearly benefit more from such a jump than those in higher-cost cities, while businesses will feel a relatively greater burden here than the other cities.
"It's a judgment call on the politics and philosophy," Johnston said. "The economics can't give you a clear answer."
There is one clear winner if the City Council implements the $15 minimum wage: economists and other researchers.
"There is going to be a lot of great social science research done on Minneapolis," Jacobs said. "Hopefully, the conclusion is not that the city moved too fast."