If a driver is in Northwest-Central Minnesota tooling around on roads covered in chips and crushed rock, they were likely spread by Asphalt Preservation Co.
The Detroit Lakes-based company has a half-dozen full-time employees and about 30 who work throughout the company’s busy season from April to October. Averre Marquis, the company’s president, typically pays about $20 per hour, often to students whose schedules fit well during the busy time.
But Marquis is concerned about a bill working its way through the Legislature would turn that rate from premium pay into the state’s new minimum wage.
“It used to be that being in that range, we always had people in the rear-view mirror, like the McDonald’s of the world,” he said. “Anymore, they are chasing me right around with pricing.”
Costs will follow
One problem, Marquis said, is businesses – especially small businesses – cannot afford to eat the costs associated with significant labor increases. So, if his labor costs increase, so will the prices he charges for road projects. Since his clients are typically governmental, those costs will then be passed along to taxpayers.
“It is just poor economics,” he said. “McDonald’s isn’t going to make less money. They are going to charge more for a hamburger.”
Another issue is when Marquis has to increase wages for those on the low end of the pay scale, he said he then has to provide increases for everyone on the upper end. So, those already making $20 will get bumped to $25, and so on.
The bill, intended to increase the minimum wage to a livable wage, was proposed by Sen. Zaynab Mohamed, DFL-Minneapolis. It would increase the statewide minimum wage to $15 per hour on Aug. 1 and increase it annually until it reaches $20 per hour by Aug. 1, 2028.
The bill would also remove a 2.5% inflator cap that supporters say prevented the minimum wage from keeping up with inflation in recent years.
Mohamed spoke during a Senate Labor Committee meeting last month about working in high school to help her family. She made more as an 11th grader than her mother, who works in a factory.
“It’s really important for us to recognize that,” Mohamed said. “What I hear from the business community is we don’t want any more mandates, but what I hear from our workers is we’re not getting paid enough. We’ve got to find a balance for what it means to make Minnesota a place where people can live.”
Marquis is empathetic to those struggling to make ends meet but he adds that those jobs typically aren’t intended for those trying to raise a family. In many cases, he said, citing truck stops and grocery stores where there are fewer tellers and more automated checkout lines, those jobs are going away.
“When I go to my local grocery store, there always used to be people there bagging your groceries,” he said. “Now, you self-bag, you self-checkout. So, there’s a point where those jobs are just going to go away too.”
Unintended consequences
Opponents of the bill cite a study conducted by the Federal Reserve Bank of Minneapolis indicating previous minimum wage increases in Minneapolis and St. Paul led to fewer jobs available in each city.
“The most recent iteration I’m aware of that came out last year found a substantial decrease in the number of jobs, the amount of hours and the actual earnings for workers in retail, full-service restaurants and limited-service restaurants,” said John Reynolds, the Minnesota director for the National Federation of Independent Businesses. “Our point is just that when the government tells small businesses to do something they can’t afford to do, they just can’t do it. And, so, you have choices to make, which are either raise prices, get by with fewer staff or close your doors.”
Reynolds, too, is sympathetic to those who are struggling with low wages, but adds there will always be people struggling at the bottom of the wage scale. It needs to be addressed, but in some other way, he said.
Especially when Minnesota is already competitive in wages, said Lauryn Schothorst, director of Workplace Management and Workforce Development Policy at the Minnesota Chamber of Commerce.
“And our state’s minimum wage already automatically increases each year,” she added. “More so, removing the designated small business rate would make it spike without warning for these job creators.”
Pending disaster for restaurants?
Daniel Fanning, vice president of strategy and policy for the Duluth Chamber of Commerce reserved judgment in hopes that there is still an opportunity to negotiate on details surrounding the bill.
“It’s definitely something we’re keeping an eye on,” he said. “We’d want to make sure it doesn’t have unintended consequences and/or put additional burdens on the backs of local small businesses, many of whom are already facing financial workforce challenges.”
But one Duluth Chamber member, Tony Bronson, left no question what he thinks will happen if the wage bill passes as it stands right now.
“It would be devastating,” said the director of business development at Grandma’s Restaurant Company in Duluth, which owns the flagship Grandma’s location and five other eateries.
Labor is the highest cost at Grandma’s. And, Bronson said during the pandemic many employees left the industry, forcing restaurants to pay higher wages to attract talent. Add to that already tight margins and the lack of a tip credit that would allow Minnesota restaurant owners to count tips toward minimum wage, and the industry is already facing significant challenges.
So, Bronson said, further increasing wages in this labor-intensive industry would force price increases or shutdowns.
“We love our servers and appreciate their efforts all the time. A good server can make all the difference in a dining experience,” said Bronson, also the president of the Duluth Local Restaurant Association. “There’s a limit to what you can charge for a hamburger. What’s going to happen is the small operators are going to be the ones that go away first.”
