In report on effects of St. Paul minimum-wage hike, echoes of Minneapolis debate

MinnPost photo by Peter Callaghan
The St. Paul City Council met Wednesday to discuss a potential city minimum wage ordinance.

If St. Paul City Council members weren’t already inclined to support a city minimum wage ordinance, they received a whole batch of reasons Wednesday to push them in that direction.

Citing a recent report by the Metropolitan Council, the head of the Citizens League told council members that St. Paul has the region’s highest percentage of people living in poverty at 40.8 percent. The same report found that the number of Census tracts in the city identified as being areas of concentrated poverty increased from 32 in 2006-2010 to 38 in 2011-2015.

Other calculations show that living costs are higher in Ramsey County than in the state, and council members already are wrestling with an ongoing shortage of affordable housing — especially for those at the lowest incomes. All make the elected officials sensitive to calls for higher wages and all were the starting points for the Citizens League study of the potential impacts as well as the likely concerns posed by a higher wage within city limits.

The report was based not just on statistics but on listening sessions and interviews conducted by league staff with workers and employers, unions and industry associations, nonprofits and advocacy organizations.  

Specific employer concerns

Without trying to resolve often irreconcilable differences of opinion — that’s what the seven council members are for — the study led by Executive Director Pahoua Yang Hoffman pointed out the bumps in the path. For example, some Hmong-American merchants with very small businesses — sometimes simple booths at markets — asked for more distinctions among employer size than the over-100 workers/under 100 workers used in Minneapolis.

Health care services that are reimbursed by state and federal funds worried that they won’t get a corresponding increase in rates just because the city they are in has a higher wage. Food franchises and even small bookstore owners said their prices are set by others — the fast-food companies and publishers respectively.

Those who employ disabled workers and youth workers told the league they might not be able to employ as many if they too are covered by a higher wage. And some business owners said they are facing regulation fatigue from federal, state and now local mandates that increase their costs. There was the Affordable Care Act, the state minimum wage, the city paid leave ordinance and now a city minimum wage.

“Many small businesses felt that over the last four or five years they’ve had to accommodate for these changes,” Hoffman said. “Four years might feel like a long time but for them it was yesterday … they were very disappointed that the city of St. Paul may be considering a minimum wage increase.”

Who benefits, who doesn’t?

The report also looked at employment data to gauge how many residents of the city would benefit. The Roy Wilkins Center for Human Relations and Social Justice reported to the league that of the 129,232 working St. Paul residents, just over 40,000 worked in the city and could benefit from a higher wage. Another 25,000 worked in Minneapolis with its higher wage level. The rest would remain under the state minimum wage.

For the lowest-paid St. Paul residents — the 25,000 with incomes of less than $1,250 a month — only 8,300 work in St. Paul and 3,600 work in Minneapolis. Taken together, a lot of St. Paul residents, including many of the lowest paid, would see no benefit from a St. Paul minimum wage ordinance.

Pahoua Yang Hoffman
MinnPost photo by Peter Callaghan
Citizens League Executive Director Pahoua Yang Hoffman: “[Many small businesses] were very disappointed that the city of St. Paul may be considering a minimum wage increase.”

By contrast, of the 176,000 people who have jobs within the city, only 40,000 are St. Paul residents. The rest are nonresidents who might see pay benefits from a higher local minimum wage.

Tips at issue … again

St. Paul will also have to resolve the issue of how to treat tipped workers, with advocates in attendance at the council study session Wednesday calling either for a tip credit or “one fair wage.”

While many of those in the room were representing minimum wage advocates such as $15 Now and Centro De Trabajadores Unidos En Lucha or CTUL, there were also some restaurant workers who support having a tip credit. Under that system, restaurant owners can use tips to make up the difference between the state minimum wage and whatever level the city sets. Tipped workers would be guaranteed at least $15 per hour and could earn more if tips are taken in in excess of the minimum wage. Nontipped workers such as cooks and dishwashers would be paid the city minimum wage.

But what advocates call a tip penalty was the primary point of contention in Minneapolis and will likely be in St. Paul as well. Minnesota is one of seven states that does not allow a tip credit for tipped workers in the state minimum wage and “one fair wage” has become a rallying slogan for $15 Now and national groups like the Restaurant Opportunities Center.

Catherine Olsen is a tipped worker who attended Wednesday’s meeting. “I’m here today to ask the city of St. Paul to pass a $15 minimum wage with no exemptions — no tip penalty and no youth wage.”

Matt Gray is a server at W.A. Frost in St. Paul and he said he worries about the economic impact on restaurant and bars in the city of a non-tip-credited minimum wage.

“I know personally a lot of local restaurant and bar owners who are working on narrow, thin margins right now,” Gray said. “A more than 50 percent increase in labor costs is going to cause them to have to shut their doors. These are the people who make St. Paul what it is.” Jeffrey Crandall, a bartender on W. 7th Street, said he worries that owners will shift from tips to a service charge. While tips stay with the server, a service charge is kept by the owner.

Minneapolis lessons

Minneapolis did not include a tip credit in its final ordinance and has a relatively limited provision for youth employment programs. Only employers participating in a city-approved training or apprenticeship program may pay workers under age 20 a training rate no less than 85 percent of the municipal minimum wage. That wage can only be paid for 90 days.

It is not a surprise that nearly all of the issues facing the St. Paul council were played out when Minneapolis took the lead last year. Minneapolis has so far defended the wage from court challenges, winning rulings that cities do have authority to act independently from the state. That provides some legal cover for St. Paul.

But Council President Amy Brendmoen told those who crowded the council chambers Wednesday that even though many of the issues are the same, St. Paul will conduct its own examination and its own process.

5 Now
MinnPost photo by Peter Callaghan
Many in the council chambers were representing minimum wage advocates such as $15 Now and Centro De Trabajadores Unidos En Lucha or CTUL.

“Sometimes our neighboring city Minneapolis takes progressive action, sometimes a few months before we do and the advocates go through all the work in Minneapolis and they come to St. Paul and say ‘we’re ready,’ ” she said. “We need to take the time to pause and ask questions and understand it in the context of St. Paul. I appreciate people’s patience as we’re asking these questions.”

Brendmoen said she expects the council to take up an ordinance in the fall, calling that schedule a “pretty fast track.”

“We’re all going to get to know each other a lot better over the next few months and see a  lot of each other,” said Council Member Rebecca Noecker to those attending. She said she hopes the conversation will go beyond passions and reach into a discussion of the city’s values.

“We have to dig into the details when making policy, but it is important to keep in mind that this is ultimately about our values in the city,” Noecker said. “It’s not whether or not we should have a minimum wage … but what should that minimum wage reflect. What should it be and what should the outcomes of having one be for people.”

Hoffman stressed that many of those she spoke with saw the higher minimum wage as just one piece in a campaign to resolve issues related to poverty.

“They know and they realize that an increase in the minimum wage does something but not everything,” Hoffman said. “They want a more-comprehensive and  holistic approach to lifting people out of poverty.” That would include affordable housing, better transit and child-care assistance.

The work so far has been paid for with a grant from the St. Paul Foundation. The city and the league could ask for additional help to conduct more work answering questions raised so far and in getting more comment from residents.

Comments (15)

  1. Submitted by Tom Johnson on 02/22/2018 - 09:57 am.

    Ignoring The Central Issue

    The main problem with the so-called ‘minimum-wage debate’ is that the issue of dragging out the process so that it takes five years (or longer) to actually reach $15/hr. This makes the whole thing another dog-n-pony show.

    Target has recently announced that it is implementing a $12 minimum ad corporations like Amazon, Walmart, etc. are at or above that.

    As for the oft-praised “small businesses” that charge high prices (that low-paid workers can’t afford), maybe they should figure out how to put together co-ops or bring their exploited employees into ownership (ESOPs) so they could have a real financial future.

    And as for sub-minimums for kids (and no pay for “interns – who are often teens and young adults), any society that exploits kids economically is monstrous.

    So once again, the professional politicians and professional activists of both the left (who say they are calling for $15 Now when they aren’t) and right (who never saw a living being they didn’t want to exploit) put on aKabuki show to keep their constituencies thinking they are actually doing something of substance.

    And exactly what is the voter turnout in Saint Paul (or most of this “democratic” country) like?

    • Submitted by Pat Terry on 02/22/2018 - 10:33 am.

      Substance

      The reason the increases are “dragged out” is to give employers time to adjust – an immediate bump of $6 per hour would have severe financial repercussions.

      In Minneapolis, minimum wage workers of large employers got a dollar an hour raise. In July, they’ll get another $1.25, which small employer workers will get at as well. When you are working for minimum wage, those increases are pretty substantive.

      • Submitted by Tom Johnson on 02/23/2018 - 11:45 am.

        Employers Adjust?

        And meanwhile, workers – who actually create wealth with their exploited labor – don’t need to “adjust” from continued poverty and living in a nation in which austerity is a religious philosophy in the public sector. I would remind you that 40% of workers in Saint Paul, our state’s Capitol City live at or near the poverty level, that jobs are increasingly being converted to part-time and contingent work and it takes multiple people working multiple jobs in a single family to achieve “middle class” status. Yeh, those poor employers need to adjust.

        • Submitted by Pat Terry on 02/23/2018 - 02:23 pm.

          Adjustments

          I support raising the minimum wage and higher wages generally. I have also run a small business and employed people and struggled with keeping my business profitable. If you are convinced that employers wanting gradual increases and/or being concerned about wages are just exploiting workers and engaging in propaganda, I probably can’t convince you anyway. But from my experience and the experience of other small-business owners I know, that isn’t true. Their concerns are legitimate. An immediate 67 percent bump ($9 to $15) in labor costs would put a lot of small businesses under.

          So yes, employers do need to adjust. You aren’t going to help the workers by putting their employers out of business. The gradual increase was a compromise. I realize that is a dirty word for some people, but its often needed to bring about change.

          • Submitted by Tom Johnson on 02/27/2018 - 11:48 am.

            I Would Like to Say I Feel Your Pain, But…

            Almost all minimum wage proposals call for differentiating small, medium and large organizations. First, these distinctions should be made noting that all national international – and many local – franchises are part of major corporations.

            While small businesses provide jobs, those jobs are almost always of low quality. They are low-wage, part-time, with few benefits and about 95% go out of business within five years because the vast majority of small business owners do not understand the need for large cash flows during the start up period, no matter what kind of so-called business plans they draw up.

            And they refuse to admit they live in a vicious capitalist society in which they are often blocked from access to capital. One solution to all of that would be to create co-ops to acquire capital and pool benefits (or better yet benefits should be taken out of the employment relationship altogether), but that would be socialism. We can’t even discuss that.

            Also, livable wages are a right, not a gift from employers. Labor creates wealth and the conditions to grow and preserve wealth as in maintenance work and care-giving. But we can’t say that simple truth either because people in the U.S. are unwilling/incapable of saying economic truth and or/understanding it or even their own economic interests.

            So I’m not a bleeding heart liberal and it’s up to small business people to understand that their wealth comes from workers and their economic leverage comes from building co-ops, working with unions and workers, etc. Of course, none of this will happen in a nation where human rights, economic rights and employer responsibilities to workers and societies are beyond serious discussion.

            But hey, we can all get an AR-15 at a gun show, so we’re free and it’s all good.

          • Submitted by Pat Terry on 03/01/2018 - 11:23 am.

            Well

            Maybe you need to look at it as a choice between achievable gradual/partial solutions and perfect solutions that will never happen. Its not that people can’t or won’t talk about the things you mention. Its that they understand they aren’t realistic.

            The revolution is not coming. So what do you do next.

    • Submitted by Tim Smith on 02/22/2018 - 01:59 pm.

      Support the right to choose

      these workers are exploited? hardly! They are being paid exactly what the market and their skill and experience level warrants. Minimum wage jobs are not a lifelong sentence, they are a starting point and these folks will have every opportunity to move up and make more.

      What difference does it make what Target or Amazon or Punch or any other big business does? They are doing what is right for their competitive place in the market. All business should have the right to choose.Not every business has the opportunity to raise wages like the ones mentioned above.Why have cookie cutter laws that squeeze small business? and why should a waiter making $30 an hour or more get a raise anyway?

      Five years is needed so small business can afford to adjust. Middle class consumers also need that time to adjust to higher prices, fewer choices, automated menus and service. Also, limited hours, etc.

      Don’t be a wage science denier, it’s a bad idea.

      https://www.forbes.com/sites/timworstall/2017/06/26/as-ive-been-saying-seattles-move-to-15-minimum-wage-kills-jobs-lowers-low-incomes/2/#5defc3e7626b

      • Submitted by Frank Phelan on 02/23/2018 - 06:08 am.

        Sauce For the Goose, Baby, Sauce for the Goose

        Corporate CEOs don’t rely on this mythical market place you speak of when setting their compensation. They rely on a rigged system of crony capitalism where they sit on each other’s boards. Compensation is set in an I’ll scratch your back you scratch mine manner. And while executive pay has risen on the order of 400% in recent decades, corporate income has not come close to increasing by that much, nor have wages on the shop floor, so we know executive pay has not risen based on performance. Why should we let CEOs pull this scam but not anyone else?

        Further, many employers have already outsourced decisions on what to pay employees. They pay their employees a base salary, and then rely on customers to determine the final wage. What do you call tips? If someone is so knowledgeable about running their business, why in the world would they let a customer make such an important decision?

      • Submitted by Patrick Steele on 02/23/2018 - 09:00 am.

        Employer and Employee

        Employers hire employees when it’s profitable to do so. An employer only will hire (or retain) an employee if they are making more money off the surplus labor of that employee than it costs to employ them. So yes, all employees are underpaid.

      • Submitted by Tom Johnson on 02/23/2018 - 11:50 am.

        Wage Science?

        The “wage science” you refer to is fundamentalist employer propaganda that has nothing to do with reality. Employers use whatever means they can to suppress wages and inflate profits (including sucking hundreds of billions of dollars in corporate welfare from honest taxpayers). That’s the mythical “marketplace” that you refer to. It sickens me that so many people buy this garbage and propaganda and ignore the right economic decency of the vast majority of their fellow citizens.

        • Submitted by Ilya Gutman on 02/23/2018 - 09:41 pm.

          “Employers use whatever means they can to suppress wages and inflate profits” That is actually a part of the “wage science.” And employees do whatever they can to increase the wages: strike, unionize, use public pressure, or just quit – that is also a part of the “wage science.” The alternative is government setting all wages and prices – just like in Venezuela.

  2. Submitted by Bill Johnston on 02/22/2018 - 11:50 am.

    Other effects

    Please see this as an open question for information – not as a question leading to one conclusion or another. (That would imply I have the answers, and I don’t.) While my knee-jerk reaction to a $15 min wage is positive (and maybe given what Target, Amazon, etc. are already doing it ought to be higher), but what do we know about the second-order effects? In places where requirements have been enacted, what have been the effects on youth employment and on small businesses? What has happened to housing and other costs in those communities three to five or more years after wages went up? (Research has shown that federal programs funneling money into the pockets of undergraduates for the purpose of making it easier to afford college have commonly resulted in faster rising tuition causing the positive effects for underfunded kids to be pretty short-lived and not helping anybody to graduate, but only to get started.)

    It just seems that raising minimum wage without regard to other variables MIGHT be a policy with unintended consequences. Anybody know?

  3. Submitted by Usha Abramovitz on 02/23/2018 - 04:43 am.

    Indexed minimum wage

    I propose a moving indexed minimum wage, calculated as a percentage of the average compensation of top management, with a floor. This will protect businesses that justifiably cannot afford wage increases, and reduce income inequity.

    To elaborate, the minimum wage will not be expressed as an absolute number, except for the floor i.e. lowest possible wage across all companies. Instead, it will be tethered to the average compensation of top management and increase, or decrease with it.

  4. Submitted by Naomi Williamson on 02/26/2018 - 01:54 pm.

    $70 tip – one table

    Took my family for a rare evening out to celebrate a new job. Dinner for 5 – just one of several tables for our server on a busy Restaurant Week evening – yielded a $70 (20%) tip for her. She will tip out the bartender – and no one else. Why does she deserve to earn $15 an hour plus tips when the other minimum wage workers in the restaurant do not – and I know the owner is barely getting his product invoices paid before his suppliers cut him off – and can’t afford to go to a doctor for his health issues?

    Tipping needs to become a thing of the past. All workers need to be paid a living wage. And healthcare should be Medicare for All.

    I’d still be a restaurant owner if that was current reality.

    But at over $400 for dinner for 5 – with downtown sales taxes, 20% tip and pay parking, dinner out – especially downtown – is something I and my family will do less and less. No matter how much we love the restaurant. Ultimately, that is the fact that will hurt businesses and employees both.

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