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.
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.