Minneapolis study of $15 minimum wage cites benefits, draws skepticism

A long-awaited analysis of a $15 per hour citywide minimum wage in Minneapolis found it would boost pay for many workers without much impact on businesses — a finding that immediately drew skepticism from the business community.

The study revealed to City Council members Wednesday spanned more than 200 pages and noted that about 71,000 workers in Minneapolis would benefit from a $15 an hour minimum wage. About half those beneficiaries would be nonwhite (including Hispanics), and just under half are also residents of the city.

"I think this is the most direct way that we as the city can help close the racial disparities in Minneapolis," said Council Member Alondra Cano at a meeting Wednesday.

The report was led by the Roy Wilkins Center for Human Relations and Social Justice at the University of Minnesota, with a research team including the AFL-CIO's chief economist, researchers at the union-supported Economic Policy Institute and economics professors from Rutgers and St. Cloud State University.

If Minneapolis were to enact a citywide minimum wage, it would be the first to do so in the state. The report examined the impacts of a $12 and $15 minimum wage in Minneapolis and in Hennepin and Ramsey counties. But it did not tackle how a city minimum wage might cause businesses or consumers to move elsewhere. That go-it-alone approach to the minimum wage has been a primary concern of Mayor Betsy Hodges and some others.

"A big concern I have here is: Are we big enough to be an island?" said Council Member Linea Palmisano.

The broadly rosy nature of the report on such a complex issue did not sit well with Council Member Lisa Goodman.

"I was really hoping we could to get a study back that kind of shows us what the cost-benefit was, how it would affect businesses," Goodman said. "But when I see a report that basically says, 'There's no negative to businesses at all,' it's hard for me to consider the report completely unbiased."

Activists had pushed earlier this year for a public vote on a $15 minimum wage, gathering thousands of signatures to place the issue on the ballot in November. But the city prevailed in court, arguing that it was not a proper charter amendment.

Having avoided the ballot measure, city leaders said they want a staff recommendation on a policy by mid-2017. In the interim, city staff will be engaging in discussions with businesses and workers.

The study found that the largest share of workers who would be affected by a new minimum wage work in restaurants, retail, non-hospital health care and administrative support. In addition to raising employee pay, a higher minimum wage would generally reduce employee turnover, the study found.

The report offered a range of impacts to employment and earnings. In restaurants, it found a $15 minimum wage could cause the number of employees to drop anywhere from 0 to 3.3 percent. Employee earnings in that sector, meanwhile, could rise between 0 and 28 percent. The increased costs could translate into a 5 percent increase in food prices, the report said.

Workers rights groups saw a lot to like in the findings.

"It's pretty unanimous that the impact that it will have on jobs in the region are minimal and the upside is significant," said Abou Amara, public policy director at Neighborhoods Organizing for Change, one of the chief proponents of a $15 minimum wage.

Matt Perry, president of the Southwest Business Association, said he has heard from members anticipating cost increases in the tens of thousands of dollars if a minimum wage policy is enacted.

"When I read this report and it says there will be minimal or no cost to the business, that just doesn't jibe with what we're hearing back from business owners," Perry said.

Perry also criticized the report for not addressing the "porous economic boundaries" that easily allow consumers and businesses to hop from Minneapolis to Edina or Richfield. But Economic Policy Institute's David Cooper, who worked on the report, said businesses in the most affected industries choose their location based more on access to customers.

"So if they've already made the calculus that it's worth the higher rent to be in the city, increasing their labor costs somewhat from a higher minimum wage is probably not going to be a big enough factor to influence their location," Cooper said.

The Roy Wilkins Center's Samuel Myers added that many variables affect why a restaurant might, for example, choose to close or leave downtown Minneapolis.

"It's really almost impossible to determine how much of that is due to minimum wage as opposed to other legitimate factors like, for example, change in ownership," Myers said.

Eric Roper • 612-673-1732

Twitter: @StribRoper