Move to raise state’s minimum wage held up by debate over indexing

MinnPost photo by Briana Bierschbach
Supporters of raising the state minimum wage held a rally in the Capitol Rotunda on Feb. 25.

This is one in a series of articles funded by a grant from the Northwest Area Foundation.

Lawmakers in St. Paul aren’t talking much about increasing the state’s minimum wage these days, despite an aggressive push from Democratic lawmakers at the start of the legislative session to quickly get a bill to Gov. Mark Dayton’s desk.  

An increase in the minimum wage was not part of legislative negotiations this week over passing a tax bill, and after an initial blitz of hearings, the minimum wage conference committee has not met in more than a week.

“The Speaker [of the House] and I haven’t said the word minimum wage in weeks,” Senate Majority Leader Tom Bakk said Tuesday.

At the crux of the delay in passing an increase is the question of whether to index a new, higher wage to inflation.

Senate and House Democrats have agreed to raise the state’s minimum wage from $6.15 per hour for large employers up to $9.50 per hour, but Democrats in the Senate say they don’t have the votes required for passage off the floor if a wage that high is also indexed to inflation.

“I think the issue becomes getting 34 votes on the Senate floor, and so if there’s not enough people who will vote for $9.50 with indexing then we’ve got a problem,” said Sen. David Tomassoni, DFL-Chisholm, a member of the conference committee negotiating the bill details. “We have to make sure we get that ironed out.”

Business, legislative concerns

Suburban and rural members dominate the Senate DFL caucus, and many have heard concerns from small businesses and chambers of commerce in their communities about increasing and indexing the wage.  

“Businesses are concerned that having an automatic inflation factor is not controllable on their end,” Tomassoni said. “I suppose you could say that about a lot of the products they market or a lot of the products they have to buy, but at the same time, if the minimum wage is something they consider to be a linchpin in whether or not their business goes forward, that’s a legitimate concern for them.”

Freshman Sen. John Hoffman, DFL-Champlin, said he’s heard concerns from across his district that going up to $9.50 per hour and indexing the wage for inflation will put a serious strain on businesses.  

“Now you’re telling a private employer we’re going to raise the minimum wage, give that person some time to make adjustments,” Hoffman said. “I’m good starting at $9.50. Lets get that done first and let’s move on.”

Sen. Rod Skoe
Sen. Rod Skoe

Senate Taxes Chairman Rod Skoe says he believes lawmakers should regularly revisit the issue of minimum wage. He opposed indexing a number of provisions in the tax bill last year, he said.

“I’m just not a supporter of doing that,” Skoe, DFL-Clearbrook, said. “I think there’s value in the Legislature revisiting these issues from time to time to make sure they are at the appropriate level, and the way to do that is not index.”

Other senators would prefer not to talk on the issue at all. An intense lobbying effort is underway at the Capitol. Senators believed to be on the fence about increasing the wage have been targeted by labor unions since last year, when lawmakers failed to negotiate a compromise.  

“I’m a supporter of minimum wage and I’m going to support what’s negotiated,” Sen. Terri Bonoff, DFL-Minnetonka, said. “I’m not commenting on [indexing] because there’s no benefit other than to know that I’m going to be a green vote. “

House pushes indexing

On the flipside, the House is bullish about indexing the wage to keep up with the rising costs of living over time. House DFL leadership says a new minimum wage will immediately start losing it’s value after it’s passed, and if history is any indicator, legislative increase to the state’s minimum wage increases don’t come easy and often in St. Paul.  

House Democrats have offered indexing the wage to inflation starting in 2017 instead of 2016.

Minimum Wage: Too low or too costly?Their latest offer also switches the inflator from the Consumer Price Index (CPI) to the “implicit price deflator,”  which isn’t based on a fixed set of goods and can change from year to year with people’s consumption and investment patterns.

The Senate rejected that offer. “I think that the people who are opposed to indexing are opposed to any kind of indexing,” Tomassoni said.

But not everyone in the House was initially on board with indexing the wage to inflation.

“I’ve come on board with it. I wasn’t there right away,” Rep. Jeanne Poppe, DFL-Austin, a member of the minimum wage conference committee, said.

“For the long term, I think there’s a benefit to it,” Poppe said. “It’s not just youth that we are employing in minimum wage jobs, we do have people who are trying to raise families, so I’d like to see that as part of the final package.”

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Comments (7)

  1. Submitted by Dennis Tester on 03/21/2014 - 09:15 am.

    What the experts think

    “When people say we should raise the minimum wage. I worry about what that does to job creation … potentially damping demand in the part of the labor spectrum that I’m most worried about.” – Bill Gates

    “If you could have a minimum wage of $15 and it didn’t hurt anything else, I would love it,” he said. “But clearly that isn’t the case.” – Warren Buffet

    “I know $10.10 still isn’t a whole lot of money, but I think it’s too much, too fast. “I’m not supportive of that.” – Sen. Mark Pryor – D Arkansas, home of Walmart

    • Submitted by Matt Haas on 03/21/2014 - 11:48 am.

      And I should care why?

      Two billionaires and a shill for billionaires. None of whom, (though Buffet at least occasionally makes the effort) have any concept of the way of life for the average US citizen. Gates and Buffet have done well for themselves, hooray! I could not care less about what they think the prescription for my, or any other non billionaires woes might be. Pryor is nothing but a spineless DINO (to borrow one of your pet acronyms) whose opinion I hold in even less regard. Get over the aristocrat hero worship and recognize that only by protecting the poor from exploitation, through measures like the increased minimum wage, will any true equality of opportunity ever be achieved.

  2. Submitted by Paul Udstrand on 03/21/2014 - 09:17 am.

    Mediocre business people

    Look, if MW is tied to inflation, those costs won’t rise any faster than any other costs, and inflation also raises the prices all these businesses charge for everything, so it’s self financing. Looking at the big picture doesn’t seem to a skill set for small business owners eh?

    Or, they just want to capture more of their profits for themselves once inflation catches up to the new MW.

    The only problem with saying “we should look at this once and while” is… they don’t.

  3. Submitted by John Appelen on 03/21/2014 - 02:20 pm.

    Perpetual Motion Machine

    I think we should index all of our costs to inflation…

    That way we can insure that prices keep inflating. I mean they inflate, people get a raises, so they inflate, the people get a raise, and on and on and on.

    I am happy a lot of my wealth increases with inflation !!!

  4. Submitted by Tim Milner on 03/21/2014 - 03:07 pm.

    I guess I am

    at the core problem with American society. A small businessman, in a manufacturing business, trying to stay afloat.

    Paul paints the greed business owner with such a wide brush that I have to believe that he, like our President and many of our elected officials, has every had the responsibility of managing a business to meet a payroll. If they had, they might recognize that these issues are just are so simple as they seem to make them.

    I wish I was big and powerful enough to set my own prices for my services. I don’t – it’s my customer who has the most clout in setting the prices. I might want $10 for something – but if the customer is willing to pay only $8 – then I have a problem

    I can walk away – and sometimes I do – but that is a risky revenue generating strategy. I can match price – in which case I better be able to manage my costs down to make a profit at a 20% lower price. Or I can attempt to find some middle ground price by selling other value added aspects of my services (instead of just price)

    But it is the customer choice to buy from me or someone else. That someone else who might be in another state, or maybe another part of the world, where the labor costs are totally different.

    If the minimum pay is indexed to inflation, a host of other employees above the minimum wage will get raises too. Do you really think that a business can give the $10.10/hr worker a 2.5% COLA increase and not do the same for the $12/hr worker? Can’t happen – without causing major dissension issues within the work place. Businesses will need to pay indexing increases to a lot more people more than just those on minimum wage.

    This effect is well understood by both manufacturers and the unions that represent some workers. The number of union members who would get a pay increase due to the minimum raise increase is not all that large. In manufacturing, most starting union jobs already pay close to, if that above, minimum wage. But the potential for wage cascading, especially if index, could positively effect a lot of union workers pay rates. Making it a good issue for the Labor unions to lobby in favor of.

    Do people realize that wages are not automatically increased every year? I have had years when there have been no increases. Sometimes because business was tough and I simply could not. But in some of those years, it was because employees asked for other things, such as less costly benefits, which I provided instead. Mandate indexing and those options disappear.

    Of course in America, all inflation costs go up exactly the same in each and every market segment. So food goes up the same percentage as gas. Clothing the same percentage as electricity.

    Or does it? Seems to me COLA is an average of price increases in a variety of market segments – some generating healthy profits while others maybe losing money. But indexing minimum wage is not going to care if it is a healthy market segment or not – your costs are going up.

    Which brings up another point. If indexing causes a 2.5% COLA because it was heavily influenced by rising energy costs (as an example), did not my business energy costs increase too? Probably. But can I pass it along to my customer? Maybe. Maybe not. And if not, how to I handle increased labor costs plus the increased costs that resulted in the COLA?

    This is already too long a post – and I could offer more examples of the effects on small businesses. But enough. Let me leave it at this.

    Minimum wage increases need to be carefully made, in a slow and cautious manner, to insure the minimal amount of unintended consequences occur. They should never be put on autopilot based on indexing.

    • Submitted by Matt Haas on 03/21/2014 - 10:42 pm.

      This isn’t meant as disparagement, it really isn’t.

      But if the only way in which a business is able to remain viable is to pay its employees sub standard, poverty wages, what is the benefit of having that business remain a part of the economy? (Not using you as an example Tim, no clue what you may your employees). Outside of the benefit to the proprietor, and what ever we manage to collect tax wise, what real value is being created. So often it seems that the small businesspersons I here from in a forum such as this come across as utterly tone deaf with regards to how ungrateful they are towards their workers. I have a hard time coming up with a non-adversarial way to put it, businessnowners are not doing some great deed or favor by offering employment, they’re utilizing someone else’s skill and experience to do things in their business they would be otherwise unable to do themselves. For such a crucial asset I never ceased to be amazed at how little value folks place in their workers. Why one wouldn’t seek to see their staff compensated as highly as is possible given the alternative is baffling to me.

    • Submitted by Paul Udstrand on 03/24/2014 - 10:47 am.

      What Matt said…

      In addition to Matt’s reply I’ll just add:

      This IS slow and careful. Listen, even at $10.50 an hour minimum wage remains $5.00 BELOW a living wage, we’ll still be subsidizing your employees. And the indexing can be tied to any index that makes the most sense. We haven’t changed this in how many years, and you guys are still paying the old wage, and you want us to slow down?

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