How Minneapolis got right back to where it started from on a city-only minimum wage

MinnPost photo by Peter Callaghan
Deputy City Coordinator Nuria Rivera-Vandermyde discussed the staff report on the minimum wage to the city council May 25.

As political debates go, this one seemed over almost before it began.

Once activists in Minneapolis succeeded in collecting enough signatures last summer to place a city only minimum wage measure on the ballot, a clear majority on the city council signaled they would support such an ordinance.

In fact, that there would be a city minimum wage somewhere around the $15 an hour level was known a year ago. And that it would not contain the tip credit wanted by restaurant owners and servers was essentially decided by council members over the winter.

Now, as the council readies for a pair of public hearings on an ordinance that should closely track a city staff report on the issue released late last month, the big pieces are all but decided, needing only a formal vote. 

So why the big time gap between those realizations and the adoption of an ordinance, expected to come sometime in July? 

Process — and politics.

A response to charter push

Three years ago, Mayor Betsy Hodges and a clear majority of the city council was opposed to a city-only minimum wage. When the council opted to pay for a study of the economics of such a move, it was considered a way to dodge the issue.

“If there were seven votes to create a minimum wage in Minneapolis only, we’d be doing it,” Council Member Lisa Goodman said in September 2015. “So I’m just wondering, why spend $175,000 for a study?”

Less than a year after those comments, activists — including those from the groups $15 Now, Neighborhoods Organizing for Change and Centro de Trabajadores Unidos en Lucha (CTUL) — had gathered enough signatures to place a city charter amendment on the issue before voters.

But Minneapolis’ charter does not allow direct democracy, as some cities do, by placing proposed ordinances on the ballot. And City Attorney Susan Segal had advised the council that the minimum wage amendment appeared to be an ordinance; simply calling it a “charter amendment” didn’t change that. 

A majority of council members supported Segal’s position. Once council members took what was, at the time, a very unpopular vote in front of a very unhappy group of minimum-wage activists, though, it seemed wise politically to do something supportive. So the council directed city staff to meet with “stakeholders,” look at what other cities have done and examine the results of a pending economic study in order to report back with a recommendation on what to do next. Even as they made the direction, a super-majority of council members endorsed a city minimum wage.

No presumptions?

At the time, at least one council member — Green Party member Cam Gordon — suggested the staff direction was “inside strategy”: diverting attention from the previous vote that rejected a citizens’ petition. But backers of the move saw it differently. Council Member Jacob Frey said the council process is more deliberative and more likely to craft an ordinance that is workable. And Council Member Andrew Johnson compared what he hoped would happen with minimum wage with what had just happened with paid safe and sick time. That is, a public process that explored the issues, considered all opinions and arrived at a plan that could be accepted — if not loved — by most.

Wouldn’t a similar process work similar magic on the minimum wage, a policy that had the potential to be just as divisive?

Rather than use a citizens’ task force, the council directed staff to do similar work and report back in the spring. Why that long? The more cynical observers suggested it would allow the council to delay a vote until after DFL endorsements for city council had been made. The more pragmatic suggested it would move the action beyond the 2017 session of the state Legislature, where Republicans might try to torpedo a city-only ordinance.

Either way, there was an expectation that the politicians wouldn’t prejudge the work of the staff. That is, if the process was to be influenced by the residents who took part in “listening” sessions, it should at least appear that there were no presumptions, no pre-arrived at conclusions.

But that notion crumbled after the 2016 election, when Hodges announced a new position on the minimum wage. Whereas she had once opposed Minneapolis acting alone, preferring a regional, state or federal solution, she now said she realized the political circumstances in Washington, D.C. and at the state capitol made that unrealistic. She also proclaimed that she would not support an ordinance that included a tip credit (or a tip penalty, depending on what side you’re on), siding with minimum-wage activists and against most restaurant owners and servers. Hodges position further empowered activists and forced a majority of council members — especially those in tight endorsement battles — to declare a similar position.

All of which meant that city staff members were put in the awkward position of assuring those who attended listening sessions that no decisions had been made — at the same time a majority of council members, one-by-one, were doing just that.

When city staff submitted its report last month, it recommended that council be the first in the state to adopt a minimum wage that would raise workers to at least $15 an hour over a four year period. The staff listened to residents and businesses who feared the economic repercussions of a Minneapolis-only minimum wage. But based on the direction it was given by the council, it was always unlikely that the staff would recommend the council do nothing.

Tip issue roils restaurant industry

Staff members also listened at length to restaurant owners and servers who said the business model was dependent on what they called a tip credit. Under such a system, restaurant owners would be required to guarantee that tipped employees receive at least $15 an hour. But they could require employees to count tips for the increment between the state’s $9.50 an hour minimum wage and $15. After that, any tips would remain with the tipped employee.

The issue soon became the No. 1 flashpoint in the debate, with activists making the rejection of what they called a tip penalty a political litmus test for candidates seeking DFL endorsements, not just in Minneapolis — where it is an active issue — but in St. Paul, which has not yet initiated any minimum wage discussions.

Once a majority of the council followed Hodges’ opposition to a tip credit, the staff recommendation became moot. Nonetheless, Deputy City Coordinator Nuria Rivera-Vandermyde said city staff decided near the end of its process to recommend against including a tip credit in its recommendation for a simple reason: Because the state is one of eight in the U.S. that does not have a tip credit in its state minimum wage.

“It would seem to us that we should honor that approach,” she said. “We could lean either way, but we decided at the end of the day, that was the best approach to move forward.”

The tip issue was most-contentious issue that came up at listening sessions. And Rivera-Vandermyde said it was the toughest to decide. “This is the hardest issue, I would say, that we dealt with,” she said. “I’m going to be very candid and honest and say the staff team struggled with this question. There is no right answer.”

The staff report makes no mention of one of the issues that Hodges said swayed her: that tipped female workers are more likely to face harassment on the job. “Think about it,” she wrote in a February blogpost. “I simply cannot countenance a scheme that would actually keep tipped women workers at a lower wage and continue to subject them to sexual harassment. It is unconscionable to me.”

But activists aren’t opposed to tipping. They’re only opposed to the use of tips to make up part of the first $15 in wages. Yet in Seattle, the first major city to adopt a city minimum wage, restaurants are converting to a non-tipped system with service charges added to bills instead. Some do not even provide a line on credit card slips for additional tips. Whereas servers and bartenders keep all tips, service charges stay with the owner, who can use the revenue to raise wages in both the front of the restaurant and the kitchen.

The debate has roiled the city’s restaurant community. Servers supporting the tip-credit plan proposed by a group of restaurant owners, Pathway to $15, were accused of being toadies for their bosses. Sarah Norton, one of the organizers of an unofficial collection of servers and bartenders called Service Industry Staff for Change, said she has been accused of that and worse.

Minimum wage activists have accused servers like Norton, who attended protests and rallies on behalf of the tip credit, of being restaurant owners and managers, not restaurant employees.

In a post on Medium.com, meanwhile, servers who oppose the tip credit wrote that they had been harassed and threatened by managers who learned of their activism. When Drew Madland, who opposes a tip credit, asked to speak at one of the meetings organized by Norton, she said no. Madland had criticized the server group’s connections to the state Restaurant Association which was lobbying the Legislature to block any wage action at the local government level.

Other issues emerge 

The council was cleared to act on a city-only minimum wage ordinance when Gov. Mark Dayton vetoed a bill that would have nullified their ability to such actions, known as pre-emption. Dayton, who has in the past said he thinks wage levels should be set at the state, not local level, backed what has become a central DFL position: that failure to act on worker issues at the state and federal levels leaves local government as best place to enact them.

Having prevailed on the broader issue and on most of the details, the activists behind the wage issue have turned their attention to a less-obvious facet of it — how young workers will be treated.

The staff suggested allowing what it called a “training wage” for workers younger than 20, a wage that would be set at 85 percent of whatever the minimum wage is at the time. That wage could only be paid for the first 90 days of employment.

But a rally of young workers last week opposed such a plan. And some on the council were skeptical during the staff briefing. Council Member Lisa Bender said her work with homeless people through Heading Home Hennepin shows her that many are young people with children. Not all young workers are students who work to supplement parental income.

“My overall concern is that we not make assumptions about why people are working and why they need a living wage,” Bender said.

The draft ordinance will be presented to the council’s committee of the whole on June 6 at 3:30 p.m. The public hearing is June 22 at 3:30 p.m.

UPDATE: This story has been corrected to show that Mayor Betsy Hodges came out in support of a city only minimum wage and against a tip credit in December, not February.

Comments (4)

  1. Submitted by Michael Hess on 06/02/2017 - 03:16 pm.

    impacts beyond minimum wave employees

    One topic that no one seems to address is the economic impact to employers on their employees who today make more than minimum wage having worked their way up from an entry level job.

    If you have an employee who is at $15/hr today, and entry level at your place of employment is $10, your employee will be pretty irritated if new hires were making $15 like you – so their wage is likely to go up – but how much? Do they deserve 150% of minimum wage like they used to make, or do they deserve $5 more than minimum wage – either way that employee could expect to make $20-$22/hr now. What is the ripple effect across the city of the workforce who are already above minimum wage getting re calibrated? How many employees are paid hourly with some reference to minimum wage but they are above it and would expect to stay above?

    Also when the City Council members talk about lifting up 70,000 people with this city minimum how many of them are tipped employees who today make well more than $15 with tips who will see their wages actually come down?

  2. Submitted by Andrew Friedman on 06/03/2017 - 11:16 am.

    Total Error in Fact

    I am amazingly surprised that writer Peter Callaghan would write such an obviously one-sided and ill-researched article, relying on the information made readily-available by the pro-$15 hyper-partisans.

    For instance, Peter writes, “Yet in Seattle, the first major city to adopt a city minimum wage, restaurants are converting to a non-tipped system with service charges added to bills instead.”

    Did he…do any research? If he had, he’d have found that many of the restaurants that tried a service charge, both here in Seattle and nationwide have reversed this action. Why? A) Because the income for the service staff declines so much that they find it terrifically difficult to keep good servers. And B) Customers it turns out, don’t like service charges, no matter what is the common narrative on the subject.

    A whole city’s hospitality industry will be harmed just as it has been here in Seattle, just because politicians don’t want to take on the unions and loudest voices in the room.

    Don’t make the same mistakes.

    Do your own research.

    • Submitted by Bob Petersen on 06/05/2017 - 01:20 pm.

      They have zero idea on how to run a business

      The focus is about retaining and pandering for votes as well as continuing the spread of entitlement. As seen on other cities that have done this, opportunities will decrease and these types of ordinances actually hurt much more than they help.

  3. Submitted by Reino Paaso on 06/04/2017 - 11:50 am.

    Tips are charity

    The purpose of the “living wage” is avoid the necessity of those living on the minimum wage having to depend upon government assistance (food stamps) and charity (food shelves). Tips are an unfair (the bussers and cooks get none of it) and inefficient (tipping as a percentage of the bill cannot improve service because it is set in advance and only paid afterwards). Restaurant owners should raise prices and post signs stating that their employees are paid a “living wage” and tipping is forbidden.

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