For Minnesotans making minimum wage, Thursday's 70-cent increase to the federal wage floor to $6.55 per hour is a welcome boost, although not nearly enough to keep up with rising prices for fuel and food.
Minnesota businesses, on the other hand, say the move's cost will only raise prices.
Thursday's bump was the second of three annual moves signed into law by President Bush that will increase the federal minimum wage to $7.25 per hour this time next year.
Until Thursday, Minnesota was above average when it came to the minimum wage; the state minimum was $6.15 per hour for companies with sales above $625,000. But with the federal increase to $6.55 per hour for companies with sales above $500,000, the Land of Lakes is now one of the 27 states without a higher minimum.
The Legislature passed a bill last session to increase the minimum wage to $7.75 per hour, but it was vetoed by Gov. Tim Pawlenty because it lacked a tip credit for service employees such as waiters.
Dave Dederichs, manager of fiscal and labor management policy for the Minnesota Chamber of Commerce, said any minimum wage increase amounts to a decrease in youth employment and an increase in the costs of goods and services. "Bottom line, [businesses] would say this is going to be a cost driver," he said.
A study of New York state's 2005-2006 minimum wage increase by the Employment Policies Institute found that employment among 16- to 29-year-olds without a high school diploma decreased between 6 and 14 percent for every 10 percent increase in the minimum wage.
Living-wage advocates argue that the increase doesn't provide much relief for the roughly 3.1 percent -- or 83,000 -- of Minnesota's workers who are paid the minimum wage or have jobs exempt from the wage floor. Those numbers are from a 2005 study by the Minnesota Department of Labor and Industry, which is updating the study.
"A two-worker family of four would have to work more than four [minimum-wage] full-time jobs just to meet their basic needs," said Kris Jacobs, executive director of the Jobs Now Coalition. "The job quality gap between the jobs that are available and what people need to meet their basic needs has become a chasm. With the way the cost of living has increased -- especially in the last year with transportation and food experiencing tremendous increases -- this is a wake-up call for the state.
The increase will affect businesses outside the metro area as well as businesses in the hospitality and service sectors more than the big household-name Minnesota companies. But even businesses that pay more than the minimum will feel the effect, said Tom Teigen, communications director for the Minnesota Business Partnership, a group of large employers. That's because there will be pressure to raise the wages of workers who were making slightly above the minimum before today.
The Economic Policy Institute found that the new minimum wage is 19 percent lower today than it was in 1979, when adjusted for inflation.
Kara McGuire • 612-673-7293