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Minimum wage: Minnesota falls behind other states

Click to view interactive map of minimum wage rates in the United States. Minnesota is one of four states (and the territory of Puerto Rico) with a minimum wage below the federal wage, although most minimum-wage workers in Minnesota get paid the federal rate of $7.25.

As a native who has long believed this state one of the most progressive in the nation, I’m surprised at this: 19 states have minimum wages higher than the federal minimum wage – and Minnesota is not among them.

Minnesota hasn’t raised the rate since 2005, and the buying power of the amount most minimum-wage workers in Minnesota get paid – the federal rate of $7.25 an hour -- doesn’t go far these days.

As Kris Jacobs, executive director of the JOBS NOW Coalition, says so often it’s almost her trademark: “What part of ‘not enough money’ don’t you understand?’’

I got her point after interviewing her the other day when I paid for the daily lunch special (half a turkey sandwich with avocado and bacon on multi-grain with a cup of white bean soup) at a restaurant near her St. Paul office.

My takeout lunch cost me more than 93,000 Minnesotans earn for an hour’s work, according to a study released in August by the state Department of Labor and Industry.

With DFLers in control of the Legislature, what Minnesotans earn for their daily work is a topic sure to be addressed. In fact, the House has formed a first-of-its-kind House Select Committee on Living Wage Jobs to research and report on a big question: Can state policies expand economic growth by raising wages?

With a DFL governor predisposed to the idea in the past, as well as key non-profit organizations and coalitions calling for the first increase in eight years, a wage hike seems likely.

But how much?

Minnesota House Speaker Paul Thissen, DFL-Minneapolis, has said: “We want to make sure the jobs people have are paying them a wage you can live on.’’

Opposed by business

What of dissenters? They’re out there, of course.

The Minnesota Chamber of Commerce opposes any increase, arguing in part it’s not heads of households but teenagers and second-job holders getting minimum wage.

Their labor policy manager Ben Gerber also refers questioners to this 2008 video clip of Milton Friedman on the minimum wage:

“We like to keep the minimum wage in synch with the federal,’’ says Mike Hickey, director of the National Federation of Independent Business, Minnesota chapter, arguing proposed increases would endanger the health of businesses near the state’s borders.

A couple of bills calling for an increase already have been introduced at the Legislature. At a meeting last month, non-profits rallied behind a request for $9.50 an hour and they say they have sponsors for such a bill. A spokesman for the AFL-CIO says they’ll push for “higher than $9.’’

A bill brought in the House suggests $9.38. In contrast, the state Senate bill introduced last week would lift that typically-paid minimum wage of $7.25 by 25 cents an hour to $7.50.

Author of that bill, Sen. Chris Eaton, DFL-Brooklyn Center, wants to raise the state minimum wage to $7.50 an hour for larger employers, which plays out to “basically” a quarter, she says, because most hourly- wage Minnesota workers are receiving the federal minimum, due to the overriding federal wage requirement .

Note: Workers in states with minimum wages below the federal minimum are generally covered by the federal minimum wage.

Few employers pay $6.15 an hour – Minnesota’s “basic” minimum wage -- because they have to pay the federal minimum wage if they gross more than $500,000. (Eaton’s bill would raise the state’s basic minimum wage for these employers from $6.15 to $7.50.)

The state can’t accurately determine the number of Minnesotans working below the federal wage, but the number is considered small.

The increase would give low-income earners more money for groceries and put Minnesota in the middle of state wage rates, Eaton says.

Inflation index

Eaton’s bill would also tie the increase to the inflation index, as some states do and the federal government used to do. That’s an idea Hickey on the business side calls “putting on auto pilot” and “dangerous.’’

Advocates for the poor don’t like the Eaton bill either. “I find that to be a miserable proposal,’’ says Brian Rusche about the possibility of a $7.50 an hour rate.

Rusche, who heads the Joint Religious Legislative Coalition, explains how Children’s Defense Fund Minnesota, JOBS NOW, Child Care Works and the broad-ranging A Minnesota Without Poverty organization, advocate for a $9.50 an hour wage under their Family Economic Security Act proposal. That proposal carries out recommendations of the Legislative Commission to End Poverty in Minnesota by 2020.

That $9.50 is “…a very reasonable rate, given historical negligence on minimum wage and what families really need if they’re working full time year round,’’ Rusche says.

At the current $7.25 wage level a couple with two children has to work 155 hours a week combined to meet basic needs, maintains John Clay, policy director at JOBS NOW. (Basic needs include food, shelter, health care, transportation, childcare and utilities.)

Legislator Eaton argues that a larger raise would be “an awful lot to eat all at once” for businesses, but “if there was a prayer of passing” something in the $9 range she’d “be there.’’

JOBS NOW advocates believe $10.58 an hour is a better wage rate but stand with the request for $9.50 About half a million jobs across the state pay less than $10 an hour, which is not a livable wage for families, Jacobs argues .

She and her staff point out that if the federal minimum wage had kept pace with inflation over the last 40 years it would be about $10.58 an hour, according to the Raise the Minimum Wage site sponsored by the National Employment Law Project.

JOBS NOW staff say public attitudes support an increase. They cite a Minnesota State Survey in late 2008 that found almost 70 percent of all Minnesotans considered the current state minimum wage as too low and 77 percent of them favored indexing the wage level to the rate of inflation.

Step in Rep. Ryan Winkler, DFL-Golden Valley, who’s heading that special House Committee.

The idea is to look at Minnesota’s economy and why we are producing so many low-wage jobs, Winkler says, and to answer the question: “Can the state of Minnesota pursue polices to help raise wages and thus expand economic growth, create more demand in the economy, get more people to the point where they can support themselves and their families when they are working full time.’’

The bi-partisan committee will issue periodic reports this session, then spend the summer traveling around the state listening to all sides of the discussion. A final report and recommendations are due in 2014.

Postscript: There have been rumblings that Congress consider raising the federal minimum wage to $10 an hour.

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Comments (7)

Couldn't we just tie it to the Federal Rate?

MIT has some pretty detailed statistics on living wage by county and city in MN at livingwage.mit.edu/states/27/locations

For a single adult, they say that $5.21 is a poverty wage and $9.11 is a living wage. For an adult with two children $8.80 is a poverty wage and $25.25 is a living wage. The $25 seems high until you consider the increased costs of food, child care and health care.

In some cases we end up subsidizing portions of families with food stamps, child care and health care. but those costs remain even if they are hidden. The question minimum standard of living do we demand for a working adult and their families and who should bear the costs, the person, the community through taxes or the employer?

Executive to worker pay ratio

Rather than have the government try to raise the bar at the bottom, maybe it's worth it to think about why our workforce is structured in the way it is to begin with. A whole lot of our economy is made up of large corporations with a small number of highly-paid (in some cases, astronomically-highly paid) corporate employees, and then a vast army of hourly workers. You've got your chain fast food restaurants, your chain retailers, etc. Everyone in the country basically shops at the same five stores and eats at the same five restaurants. Which is a bummer.

But anyway, when people talk whimsically about the top tax rates in the 1950s being 90 percent, you've got to figure that the consequence of that is that very few people anywhere made much money in that top tax rate. Obviously there were still wealthy people in the 50s. But how many companies similar to, say, Target were there back then? Now it's a huge portion of our economy. Instead of paying twenty executives millions and millions of dollars, pay them $500,000 and raise compensation for the people at the bottom? You can't really force that of course, but taking 90 percent of everything over a certain point sure seemed to do the trick back then:

http://www.washingtonpost.com/rf/image_606w/WashingtonPost/Content/Blogs...

Plus, I would (somehow?) agree with some of what Friedman was saying in the video above. A lot of good intentioned social policies have had negative effects. The consequence having food stamps, subsidized housing, Medicaid, etc, is that these large employers know they can pay someone 7.50 an hour, because while it's certainly not fun, they can live on it with the government filling in the rest. There are stories of Wal-Mart managers encouraging their workers to apply for food stamps.

http://www.dailykos.com/story/2012/10/10/1141724/-Walmart-fuels-inequali...

Why are we letting corporations get away with this?

Compromise

I am entirely in favor of raising the minimum wage for people trying to raise children or otherwise earn a living wage. I would however suggest a couple of exceptions. 1. Wait staff. With tips, waiters routinely earn wages that might not be lavish but would definately be considered a living wage. I know, at least anecdotally, that waiters and bartenders at higher end restaurants make $70,000-$80,000 or more annually working part-time. Exception 2. A seperate minimum wage for workers who can be claimed as a dependant on someone else's tax return. I think that the business complaint noted in the article has a kernel of truth to it, however this chestnut is usually envoked in order to quash any increase in the minimum wage altogether. Why not remove the high school kids from the equation and set a smaller minimum for them while allowing actual wage earners to earn a higher wage?

Average, median, and top 10% FT wages in MN for waitstaff

As of May 2012, the median hourly wage (which includes tips) of MN waiters and waitresses was $8.68, ranking 32nd among US states. That's only 23 cents higher than the state with the lowest wages, Mississippi. The MN hourly median translates into $18,060 annually.

The top 10% of full-time MN waiters and waitresses average $11.82/hour, or $24,590 annually.

For part-time work, at $65,000 per year, 1/2 time translates into $62.50/hr and 3/4 time translates into $41.67/hr.

While it's possible a smattering of people may have that kind of wage as a waiter or waitress in MN, those are 3.5x to 5.3x the average wages for the top 10% of earners in that occupation. Rare would be an understatement.

To give some context to the median annual wage of $18,060, the 2012 Federal poverty line for a 1-person household was $11,170. 2 persons was $15,130 and 3 persons was $19,090. So unless they have other people contributing income to their household, those wages are cutting it pretty close to poverty level.

Finally, like with wages for waitstaff, Mississippi is last in the US for median income for 1-earner households, whereas Minnesota is 14th, doing 33% better than Mississippi. Compare that to waitstaff specifically, who make only 3% more than their counterparts in Mississippi.

Go with the Feds

Just let the MN rate be the same as the Federal minimum wage and move on. For those not familiar with the way wages work, the wage settles at what the market will bear. If you pay $10.00 an hour to the most menial task job, every other job in the country must raise it's wages based on that standard. How's that economy now?

Great idea

Let's raise the minimum wage so that low income earners take home more pay. Then when they file their taxes, they can end up owing Uncle Sam because they no longer qualify for the Earned Income Tax Credit.

WWAD?

What Would ALEC Do?

This bill should be titled "The Job Creator Act Of 2013".

Spread the money around, and it'll act like fertilizer for the economy. We've let it accumulate in large piles and it's really started to stink.