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Who works for minimum wage or less in Minnesota?

Federal law allows employers to count tips toward the minimum wage, but Minnesota is one of seven states that prohibit this "tip credit."
REUTERS/Brian Snyder
Federal law allows employers to count tips toward the minimum wage, but Minnesota is one of seven states that prohibit this "tip credit."

A decade ago, Minnesota's lowest-paid workers earned as much as minimum-wage earners elsewhere. Today, it's one of nine states where some workers won't even earn the federal minimum of $7.25 an hour.

By contrast, on New Year's Day 1 million people in eight states where the minimum wage is pegged to inflation, workers got raises ranging from $0.28 an hour in Colorado to $0.37 in Washington.


That may not sound like much, but to a family eking by on such modest means, the extra $300-$500 a year translates to a month's groceries.

Under Minnesota law, certain employers can pay just $5.25 an hour, or even $4.90 for youth in training. Never mind that state statistics peg the hourly wage a single, childless adult needs to eke out a living to slightly less than $12. And two adults working to support two kids must each earn $14 an hour.

Yet according to a recent report by the state Department of Labor and Industry, in 2010, the most recent year for which statistics are available, nearly 100,000 of Minnesota's 1.5 million hourly wage earners earned the federal minimum wage or less.

If the federal minimum wage had kept pace with inflation since the late 1960s, it would be $10.03 today. According to the St. Paul-based JOBS NOW Coalition, 19 percent of Minnesota jobs pay less.

Translation: We're falling behind faster and faster. In 2010 dollars, Minnesota's minimum has fallen from $8.07 in 1974, when it was created, to $6.15. The U.S. minimum, meanwhile, fell from $8.97 to $7.25.

Basic needs
According to JOBS NOW, 39 percent of Minnesota jobs pay less than needed to support a family. At the current minimum wage of $7.25 per hour, a couple with two children would have to work 155 hours a week to meet basic needs.

Overall wages have fared better. In 2010 dollars, U.S. average hourly earnings fell from a high point of more than $19 in the '70s to a low point of about $16.50 in the mid-'90s, returning to $18.98 in 2010.

The first federal minimum wage of $0.25 was enacted in 1938. It's been raised two dozen times since then, with each hike hotly debated. In 1974, Minnesota created its own minimum wage, which roughly paralleled the federal one for almost a quarter of a century.

In 1997, both minimums stalled at $5.15. In 2005, Minnesota raised its minimum to $6.15. Most workers are entitled to the highest rate available, their state's or the federal one. And so for two years, wages were higher here than they were in many places.

In 2007, however, the federal minimum began creeping up, reaching its current level in July 2009. The increase rendered Minnesota's minimum wage law irrelevant for all but the most poorly paid segment, those who are not covered by the federal rate.

Georgia, Arkansas, Wyoming and Puerto Rico also have state minimums that are lower than the federal level.

Minnesota exempts salaried workers, traveling salespeople, camp counselors and some agricultural workers, among others, from the minimum wage. The largest category is workers whose employers have annual revenues less than $500,000 and are not involved in interstate commerce.

Mom-and-pop business
A good example of what that interstate commerce clause means: Employees at a fast-food chain with outposts in several states must be paid the federal rate regardless of the store's sales, but employees of a mom-and-pop café or bar that transacts all of its business in the state and brings in less don't.

In 2009, the state estimated that 48,000 Minnesotans made less than when the federal minimum wage at the time, $6.55 an hour. The more recent Labor Department report [PDF] did not break out the number of Minnesota workers who don't earn the federal minimum, just those who earn the minimum or less.

It does provide an interesting snapshot of the state's hourly wage workforce, however.

As one would expect, as the federal minimum rose in recent years, so did the number of Minnesotans making the minimum or less.

Workers with some college education made up 60 percent of the hourly workforce and 43 percent of hourly workers at or below the minimum. Those without a high-school degree made up 10 percent of the hourly workforce and 32 percent of workers at or below the minimum.

Two-thirds are 24 years old or younger, and a similar percentage is women, who comprise more of the hourly wage workforce in general. Those earning the minimum or less are more likely to be single, live below the poverty line and live outside the metro area.

Not surprisingly, about 43 percent of those paid the minimum or less worked in eating and drinking places. The next highest percentages were in personal care (13 percent), farming, fishing and forestry (12 percent) and sales and related occupations (11 percent).

Federal law allows employers to count tips toward the minimum wage, but Minnesota is one of seven states that prohibit this "tip credit."

Political issue
In the summer of 2010, Republican gubernatorial candidate Tom Emmer caused an uproar among food service workers when he asserted that tips helped three servers at a St. Paul restaurant make more than $100,000 a year.

The restaurant's owner said the candidate misspoke, but not before Emmer's political rival, DFLer and Speaker of the state House of Representatives Margaret Anderson Kelliher, sought to capitalize on the gaffe by proposing a $1.50-an-hour increase that would bring the minimum to $7.65 for most employers and $6.75 for the smaller employers exempt from the federal rate.

The Minnesota Hospitality Association, which represents restaurants, resorts, hotels and campgrounds, favors a tip credit that would apply going forward instead of lowering the current minimum.

Many conservatives would prefer to abolish the minimum wage altogether, arguing alternately that it is bad for job creation and that government should stay out of the employer-employee compact. Others, including JOBS NOW, have assembled research [PDF] suggesting that the economy as a whole would benefits from the ripple effect of any increase.

No more increases to the federal rate are scheduled, so any action would have to occur at the state Legislature.

As a U.S. senator, Mark Dayton voted for the most recent federal rate increase. As a gubernatorial candidate, he supported Anderson Kelliher's proposed $1.50 hike. It remains to be seen, however, whether he or anyone else has the political traction to convince the Legislature to increase the state minimum.

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Comments (15)

"Others, including JOBS NOW, have assembled research [PDF] suggesting that the economy as a whole would benefits from the ripple effect of any increase."

So what. If I confiscated all of Mark Dayton's wealth and distributed it amongst the homeless in downton Minneapolis, that would have a ripple effect on the economy too. But we don't do that because that would be stealing. Get it?

At the current minimum wage of $7.25 per hour, a couple with two children would have to work 155 hours a week to meet basic needs.

I wonder how all those pro-family folks feel about that one.

Working below a standard of living is sad. However, what's even sadder are some of these neocons who then say these people should pay for their own healthcare under some Groupon-like scheme.

If we're going to have people who workk for so little, we need to see that their basic needs are met. And if that means raising the price of a cup of coffee or a hamburger, so be it.

Wait, in your world, imposing a minimum wage is stealing? Just when I think right-wing ideology can't get any crazier, it surprises me again.

I encourage readers to make use of the link to the full report and consider for themselves what it has to tell us. Ms. Hawkins's synopsis overlooks some significant information, IMO, such as:

"Among hourly workers at the minimum or
less, those in eating and drinking places were
the most likely to receive overtime pay, tips
and commissions (OTC) (52 percent).

Part-time workers made up 72 percent of all
workers paid the minimum or less, while
accounting for 31 percent of the hourly
workforce.

Those without a high-school degree made up
32 percent of all hourly workers at or below
the minimum, even though they comprised
only 10 percent of the hourly workforce.

Workers paid the minimum wage or less
comprised 10.1 percent of unmarried hourly
workers, as opposed to 2.7 percent of those
who were married."

It's also worth noting that:

"Overtime pay, tips and commissions are excluded
from hourly pay in the data used. Also, tips are excluded from wages for purposes of Minnesota’s minimum-wage law (see Appendix A). Workers may have reported wages less than the full effective minimum because they may be exempt, a lower minimum than the full minimum may apply to them, they may be paid less than the applicable
minimum illegally or their hourly earnings may be
misreported."

Overall, and based on a fairly cursory reading, the study suggests that the "typical" minimum wage employee may be a single young adult working a part-time job who is either still in high-school, a high-school dropout or a post-secondary student, and who stands a good chance of earning more than minimum wage due to tips. That is not to say that there aren't many who don't fit this description. I do think, however, that arguments in support of increasing the minimum wage should reflect this, rather than relyt on arguments that one can't raise a family on what one earns at a minimum wage job.

Those interested in exploring the JobsNow information, including an interesting family wage calculator, can do so here:

http://www.jobsnowcoalition.org/index.html

The family wage calculator includes medical insurance costs, using employer-provided, self-purchased or a weighted average of the two. It would be more helpful, IMO, if it included a "no insurance" option, though you can back out the insurance costs from the final hourly wage JN considers livable.

You'll also find median wage information by industry on the family wage calculator.

@#5
While those things might be significant, I'm not seeing anything that would change the overall message. In fact, your statement:

"Overall, and based on a fairly cursory reading, the study suggests that the "typical" minimum wage employee may be a single young adult working a part-time job who is either still in high-school, a high-school dropout or a post-secondary student, and who stands a good chance of earning more than minimum wage due to tips."

is only half supported. That is, the "typical" minimum wage employee might fit your profile, but there is no suggestion that a good portion of them are actually earning more than minimum wage due to tips. If you factor in a VERY generous average of 20% in tips, people at MN's small business minimum wage would make $6.30 (below Federal minimum wage) an hour, while people at MN's large business minimum wage would make $7.38 (BARELY above Federal minimum wage) an hour. If such a person was "lucky" enough to be getting Federal minimum wage, they'd be averaging $8.70 an hour. None of these are really LIVABLE wages, ESPECIALLY for someone working part time for whatever reason.

I also don't know why you would indicate that health insurance shouldn't be included in calculating a livable income. Are YOU going to pay for it, instead? We already know that there are enough boneheads out there that are happy to deny you the ability to get medical help because you're not lucky enough to be rolling in the dough to be able to afford health insurance. Yes, it might be an option to go without health insurance, but it adds to everyone else's costs when you can't afford the doctor's bills you've accrued due to a health failure.

In addition, the fact that minimum wage has gone down also means that kids can no longer work their way through school with a part time job, or even a full time job. This adds to the debt load for students and reduces the overall value from higher education for those students that have not otherwise funded their education.

Finally, it means that, even in your standard nuclear family, the benefits of remaining a family are reduced because of the undue amount of time required for parents to hold a job instead of being at least a part of raising their children. That's not to say that I think every family should have the ability for one parent to stay home to raise children, but at an average of 75 hours per parent at minimum wage, even weekends with their children is a stretch. Reduced parental involvement is linked to a lot of social and economic issues...nothing like guaranteeing a family will continue to struggle to make ends meet.

"Wait, in your world, imposing a minimum wage is stealing? Just when I think right-wing ideology can't get any crazier, it surprises me again."

Only because you have no idea where the money comes from, do you? Admit it.

A lot of employers forget that it's their employees

who make their earnings possible. Without employees, the employers would have to perform all functions for all the hours the business is open.

For example, some very small mom-and-pop restaurants manage with just Mom and Pop frying the hamburgers, serving the customers, washing the dishes, and cleaning up afterwards. However, no restaurant of any size can survive without cooks, dishwashers, bus persons, and servers. Their performance influences what customers--the source of earnings--think of the business and whether they'll come back after that first meal.

A retail business is similar. Clyde's Watch Repair can survive with just Clyde sitting behind the counter for eight hours a day. The Watches-R-Us Megastore needs a sales staff, inventory and shipping clerks, a couple of shifts of watch repair technicians, bookkeepers, and others.

Employers no longer respect the people who do the real work of their company.

You know, the great thing about living in a free society is that the government doesn't assign a job to you. You get to pick your own.

And since we all know that your labor is only worth what someone else is willing to pay for it, it's incumbant upon us as individuals to prepare ourselves to have value in the labor marketplace.

If your labor is worth a minimum investment on the part of the people doing the hiring, maybe you should look in the mirror instead of trying to get government to force someone to pay you more.

I'm really having a tough time figuring out how pathetic of a life one has to lead, to go on record and complain about people making an extra 37 cents an hour.

Discussions about minimum wage always face the problem of trying to apply a "one size fits all" solution to a diverse society. Legislatures have tried to make adjustments but with questionable success. Servers in restaurants include young people still living at home who are starting out who need any kind of job to older workers who have family responsibilities. Then there are social issues: should a couple who have few marketable skills and can earn only minimum wage be having children at all? Another example, is it right for companies to take advantage of desperate young people by using/offering unpaid internships? Isn't getting labor free unfair? Or, is the training and experience worth it? Doesn't it depend on the person? I believe the various legislatures who have wrestled with this problem have done the best they can, but many will remain unsatisfied.

@6
I don't know what the basis is for your tip calculations so can't really reply on that. My point, which I made quite explicitly, was that "arguments in support of increasing the minimum wage should reflect this, rather than rely on arguments that one can't raise a family on what one earns at a minimum wage job." It appears that most minimum wage earners aren't trying to raise a family.

I suggested backing out health insurance for a simple reason: most young adults don't carry it unless it comes with the job. I know of no evidence that raising their income raises the likelihood that they'll carry it. Thus, it's reasonable to consider a 'living wage' that doesn't include that factor. You appear to be pursuing the ideal; I'm trying to look at the real.

I disagree with your conclusion that kids can no longer work their way through a post-secondary education, at least to the extent that you base it on debt loads at time of graduation. The average college grad in Minnesota leaves school owing something on the order of $25,000, as I understand it. That's less than the cost of the average new car and, in my opinion, hardly a deal breaker. (It's only 5 times the amount of debt I carried away from the U of M in 1975, when the unempployment rate ranged from 8.1 to 8.6%, and the U.S was in coming to the end of a recession that began in 1973.) It was tough then and it's tough today. Perhaps it wasn't in the intervening years, but I doubt it.

If you re-read my post, you'll see that I neither opposed nor supported an increase in the minimum wage. I simply pointed out that Ms. Hawkins had omitted what appeared to me to be significant information from the study and commented on the weakness of an argument often made in support of rasing the minimum wage, i.e., that one can't raise a family on it.

BTW, there's never been a time at which one could raise a family on 40 hours a week in a minimum wage job. I know, I worked plenty of them.

Something that should be a final end to the claim there would be more jobs if there were no minimum is that the minimum is far below what it takes to live, yet many workers still get those low wages, and we're not seeing jobs created.

Regarding #1, only an ideologically blind person could think requiring employers to pay their employees for their work constitutes stealing.

There may have never been a time when it was possible to raise a family on 40 hrs a week at minimum wage, but there have been times when two people, each working 40 hrs a week, could. That's not true now. Also, now because of housing costs, it isn't possible for a "young adult" who is single to actually rent a place to live on minimum wage and still be able to eat. Over 30 percent of homeless people are employed.

Another thing to think about: When I went to college, if you worked hard all summer you could pay the tuition at the U of M with what you made, even if you rented an apartment (a cheap studio apt in Mpls then rented for about $150 a month, and if you cooked and liked beans and rice, you could eat on about $15 a week). That's not true now at minimum wage, which is all that many kids earn. If education is what will make it possible to increase one's value as a worker, shouldn't we be making it possible to get one? By working for it? What the heck is wrong with that in any Republican world?

@13:

According to the cost of living calculator at http://www.jobsnowcoalition.org/index.html, the total annual cost of living for a couple, no children and without health insurance, is $32,242.00, requiring a wage of $7.79 per hour for each worker. Looked at another way, it's $2,082.00 more than a minimum wage couple, each employed full time, would earn annually.

The same source indicates that the median wage offer is less than $8.00 per hour in only one industry (food preparation and service) and under $10.00 in only 4 of 22 sectors sectors. (All figures are for the 4th quarter, 2009.) When one looks at those 4 sectors (office and administrative suppport; food service; personal care and service; and cleaning and maintenance), it becomes fairly obvious that the key to earning more than minimum wage is education and training.

So far as I've been able to determine, the minimum wage has always been an arbitrary rate, determined more by what was politically feasible at the time than anything else. If anything, IMO, it's time for minimum wage workers to unionize, rather than rely on politicians to increase their wages. That's a difficult task in an environment in which unions are derided and much of the minimum wage economy (e.g., the food service industry) is characterized by fragmented ownership. (Those two McDonald's stores within a few miles of your home may or may not be owned by the same person or group.)

It would be interesting to see some longer term numbers, such as how long on average minimum wage workers earn the minimum wage before moving up to a more livable wage.

As for education costs, we've both used the U of M as our reference point. The cost of attending the U and other post-secondary schools has increased at a rate well above inflation over recent decades, for reasons I won't attempt to address here. I will point out, however, that the cost of attending state universities and community colleges is much lower. A half-time minimum wage job can cover the cost of tuition at one of these schools, though the student will have to look elsewhere for food and shelter. (For that matter, 3 months of FT minimum wage employment and 9 months of 1/2 time PT minimum wage employment almost covers the nut at the U of M, generating about $9,500.00 a year.)

More important, I think, is the idea that we shouldn't make laws of general application on the basis of special cases, such as the cost of obtaining an education. If the cost of obtaining the necessary education is too high, lower the cost or provide other ways to assist those in need of education and training in obtaining what they need. If there are barriers to workers organizing to bargain for higher wages, then look to ways to address those barriers. So long as we rely on politicians to ensure a living wage, we won't have living wages.