Minnesota's minimum wage will increase next year by 15 cents to keep up with inflation, rising to $9.65 per hour for workers at many businesses across the state.

The increase, announced Thursday by the Minnesota Department of Labor and Industry, is effective Jan. 1, 2018. It's the result of a 2014 law that boosted the minimum wage to $9.50 and required the state to begin calculating automatic inflationary increases for each year, starting with 2018.

About 250,000 Minnesota workers earn less than $9.65 per hour. Gov. Mark Dayton and Lt. Gov. Tina Smith said in a statement that the wage bump is aimed at helping those residents build economic stability.

"Our state and nation was founded on the belief that hard work and opportunity should go hand in hand," Smith said. "Raising the minimum wage will help make this value a reality for thousands of Minnesotans, many of them people of color and women with children."

The new rate applies to workers at businesses with annual gross revenue of $500,000 or more. Employees at businesses with lower revenue, who now make $7.75 per hour, will see their minimum wage rise by 12 cents, to $7.87 per hour. That will also be the new training rate for workers younger than 20 for the first 90 days of employment, and for youth workers under age 18.

Minnesota's minimum wage has increased by a much larger margin in recent years. In 2014, when the state Legislature approved the new law, the minimum wage was $6.15 per hour, one of the lowest in the country. Wages jumped to $8 per hour later that year, and increased by steps to $9.50 in 2016.

Meanwhile, some cities have been exploring raising wages beyond the state minimum. The Minneapolis City Council voted this summer to adopt a $15 minimum wage, which will be phased in by July 2024.

Advocates say higher pay is needed to help erase economic and racial disparities, but some business owners and business groups worry that increased labor costs could end up hurting both businesses and workers.

Mike Hickey, Minnesota state director for the National Federation of Independent Business, said the increases add up to a "big negative." His group opposed the initial bump to $9.50 and said businesses will struggle to keep up with annual wage jumps — and may end up hiring fewer people.

"I think it's going to be harder and harder for young people to find jobs," Hickey said. "They're going to consider hiring older people, automate when they can, and it's going to have a lot of negative effects on the economy."

Erin Golden • 612-673-4790