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DFLers minimum-wage deal: raises, indexing, delays, caps, overrides

MinnPost photo by Briana Bierschbach
House Speaker Paul Thissen and Sen. Majority Leader Tom Bakk announced the deal at a press conference Monday morning.

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

After more than a year of negotiations, DFL leaders in the Minnesota Legislature have struck a deal to raise the state’s minimum wage to $9.50 per hour over several years and eventually index that wage to inflation.

The deal finalized by lawmakers over the last week would raise the state’s current $6.15-per-hour minimum wage for large employers to $9.50 by 2016, with some incremental increases. Indexing — automatic pay hikes pegged to an inflation measure — would start in 2018.

About 360,000 workers will benefit, DFL leaders say; many are paid the federal minimum wage of $7.25 per hour. The minimum wage hike could be on Gov. Mark Dayton’s desk by the end of the week. The deal would move Minnesota's minimum wage from one of the lowest in the nation to one of the highest. 

"I look forward to signing this legislation into law," Dayton said in a statement Monday. 

As part of the deal, the wage will be indexed using the so-called implicit price deflator — a lower measure of inflation than the more common Consumer Price Index — with 2.5-percent cap in any given year. 

“By indexing it to inflation, by having it be a strong wage rate to begin with, we are allowing workers to take the pressure off of raising the wage and focus on all the other things that will improve their lives,” said DFL Rep. Ryan Winkler, the House author of the minimum wage proposal. “This is a great foundation for an improving economy.” 

The indexing delay and lower inflation measure were important to win the votes of rural and suburban Senate Democrats, who say businesses in their districts are concerned about absorbing the wage hike and immediately indexing it to inflation.

Senate Democrats also scored another provision on that front: the commissioner of the Department of Labor and Industry can suspend indexing for one year if economic indicators point to a substantial downturn in the economy.  That effectively means a governor can scotch indexing 12 months at a time — which two Republican candidates promptly said they would do.

If the economy improves, the inflator could be added back to the minimum wage. 

“The indexing provision needed to be able to respond to future economic downturns, which will come,” Senate Majority Leader Tom Bakk said. “It makes a significant difference in our willingness to be able accept inflation.” 

Republican gubernatorial candidates Sen. Dave Thompson and Rep. Kurt Zellers say they would suspend the indexing provision if elected governor this fall.

As part of the deal, small businesses making under $500,000 in gross sales would be required to pay a $7.75 minimum wage by 2016. That wage would also apply to large businesses, with a 90-day training wage for 18 and 19-year-olds. A youth wage of $7.75 would be paid to all 16- and 17-year-olds and anyone working under a J1 visa, a Senate requirement. The deal does not address issues related to 40-hour-or-longer workweeks for agriculture employees, whose wages rights are unchanged.

The minimum wage deal comes just 72 hours after the House passed a revamped plan for a $77 million office building to hold state senators during and after the restoration of the 105-year-old Capitol building. The building has been a Senate priority, but the contentious project has become a political flashpoint for Republicans; House Democrats and Dayton have been hesitant to fully support the proposal.

Minimum Wage: Too low or too costly?But on Friday, the Department of Administration presented new information to the House Rules Committee, which voted to move forward with a scaled-down version of the project. The Senate plans to vote on the office building on Monday afternoon, allowing the project to move forward.  

“The timing of the information we got back from the administration on the state office building is what it is,” House Speaker Paul Thissen said.  “We knew that we had to get these issues done, and the timing just happened to work out this way.”

Capitol observers are skeptical that there's no link between the minimum wage deal and the office project. Last month, Dayton accused senators of holding up a time-sensetive package of tax cuts to try and move the building forward. 

"Those are really just a handful of things in the basket of must-dos in this session, and it’s starting to come together as it should," Bakk added. "I don’t think anybody should think anything is linked to anything. There's just a basket of things that we have to do in this session and we are well on our way to accomplishing that.” 

The Senate plans to take the minimum wage bill up on the floor Wednesday, with both chambers hoping to send the proposal to Dayton before the leave for a long Easter/Passover break on Thursday. 

Legislators first stalled on a deal to raise the state's minimum wage last spring, when the House and the Senate failed to reconcile differences between their proposals in a conference committee. At the time, House lawmakers were pushing at $9.50 per hour increase by 2015 that would be indexed to inflation. The Senate was calling for a much more modest increase at $7.75 per hour without indexing. 

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Comments (8)

Why give power to an unelected member of the executive branch?

The Senate has backpedaled this issue so much I don't think they can take credit for it. The legislature has turned it into a perpetual campaign issue for the executive branch but not for themselves. They've also made it much more complicated than necessary by giving the authority to an unelected bureaucrat.

price of labor

Uh-oh! If a store raises its prices, as sure as the sun rises in the east, it will have fewer customers. The same thing will happen when the price of labor goes up. Fewer employers will pay the higher price and provide jobs. This is not a good development.

So the stores competitors are exempt

So in this magical scenario, only the business in question is forced to raise prices? (Leaving aside the obvious question as to why they were still in business if a few thousand bucks a year is enough to put them over the edge) How is that all their competitors managed to avoid this price increase? Perhaps if their business model was so dependent on an exploitative wage structure they, and society as well, might be better served by their finding a new livelihood.

Just one of the scare tactics

Just one of the scare tactics (which thankfully failed) trotted out by businesses is this one: In Tuesday's Pioneer Press, a spokeswoman for the grocer's association claimed that retail grocers operate on a 1% profit margin.

What rot. No, strike that, what a total, bald-faced, straight-up lie.

So naive

So a few thousand dollars eh?

So the minimum wage workers go to $9.50 / hr. Great for them. A few thousand dollars. Fine

But how does the current $9.50 / hr worker feel about workers with lower skills and most likely lower productivity getting the same wage as him/her? In the world that the sponsors and proponents of this bill live in, this must not be a big deal. The current $9.50 / hr worker should not care. Right? Oh how Wrong!!

To a small business owner like me - it's a HUGE issue. I can't maintain any sense of fairness and shop morale if I pay the more senior and more productive employees the same rate as less senior, less productive employees. It simply can't happen that way.

So, the current $9.50 / hr employee will get a raise. A few more thousand dollars.

And keep the cycle going. Because the pay structure squeeze continues - I my case, probably all the way up to supervisors and shop managers making $20+ / hr.

My business currently has no minimum wage employees. I do have some making less than $9.50 / hr. To maintain fairness and to differentiate between performance and job responsibility, our current estimate is that once the new minimum wage is implemented, our payroll costs will go up ~3.5%. On a $60,000 biweekly payroll, that almost $55,000 in added annual payroll.

So, what happened to the few thousand dollars?

Businesses will either need to raise prices (if they can) or find other ways to improve productivity. In my case, it will likely mean more automation and ultimately the need for fewer employees.

I guess that really fixes society's problems.

We are all losers

What a great news. The house approved a new Senate building and the Senate approved the minimum wage. Now all of us in the great State of Minnesota are losers and will pay for those things which are both unnecessary. And we will vote for the same people again, just like sheep?

I want to have a simple question answered by minimum wage increase supporters - anyone, including a governor or Rep Winkler:

How come Oregon and Washington State have higher unemployment and poverty level than Minnesota while their minimum wage is much higher than Minnesota's? Yes, they do have poverty level higher than in Minnesota, you read it correctly!

I don't think anyone can vote for the minimum wage increase until this question is answered. And I tried asking many people, including economists, and no one even tried.

Is the minimum wage a good idea?

Raising the minimum wage isn't the best approach. Allow the low-wage workers to form or join a union.

Repeal the Taft-Hartley Act and pass the Employee Free Choice Act - eliminating many of the government control and restriction and restoring freedom in the marketplace. Raising the minimum wage hurts unions, because the need for having a union is diminished and a union becomes less attractive.

This is much better than raising the minimum wage or passing more government programs. Let the principals of the free market rule. Wages should be addressed across the bargaining table, not by government fiat, rules and regulations.

Bob Kastigar, IBEW Local 1220 Chicago

its not just the private sector.

where does the state think its going to get all
the money needed to pay the increased wages
of all there union contract employees who's wages
are based on being a certain percentage above the
prevailing minimum wage?
some non-government union contracts use the minimum wage as a base also.
as far as minimum wage employees getting more take home
pay?fat chance.the increase in fica,ss,and a higher tax rate
and reduction of the earned income credit will eat it up.