$2-per-hour gap, inflation indexing divide chambers as they debate state’s minimum
Midway through a March 13 hearing in the Senate Jobs, Agriculture and Rural Development Committee, Sen. Carrie Ruud, R-Breezy Point, asked about the thought process behind a proposal to raise the state’s minimum wage. Chief author Sen. Chris Eaton, DFL-Brooklyn Park, explained to Ruud that she had set a minimum level of $7.75 because it was thought to be “harmless” to the state’s businesses.
“So,” Ruud asked, “there’s not really a formula? It’s just kind of an arbitrary number that you use?”
“Pretty much,” Eaton said.
Eaton’s flippant response aside, the figure, which constitutes a 20 percent increase over the current level of $6.15 per hour, had already been the subject of much debate among Democrats.
“That [$7.75 rate] was as much as I could get through that committee,” Eaton said in an interview. “And that was with lots of negotiation.”
Eaton’s groundwork was successful, and the proposal passed along party lines. Now, as vastly different minimum wage bills await floor votes in the House and Senate, another round of negotiations begins.
Under the House bill, authored by Rep. Ryan Winkler, DFL-Golden Valley, a phased-in increase would eventually set the state minimum wage at $9.95, higher than any other existing minimum in the country. Winkler’s bill would also lead to automatic, inflation-adjusted increases in future years, a provision absent from Eaton’s Senate version.
The pending deliberations pit the big players in the business community against major labor groups. On one side, business advocates warn that a steep increase will lead to higher consumer prices and fewer new hires. Labor lobbyists say that those fears are exaggerated and that an increase would actually boost the economy by putting more money in employees’ pockets.
As author of the more dramatic change, Winkler plans to continue to listen to business leaders, but says he won’t let them dictate terms on the minimum wage debate. “We’re hearing from them and meeting with them,” he said, “but having the business community be heard doesn’t mean we do nothing for workers.”
Minnesota currently an outlier
Minnesota’s current minimum wage rate is largely meaningless. Because the state level of $6.15 per hour for large employers is lower than the federal rate of $7.25, the federal law takes precedence in almost all cases. Any business that engages in interstate commerce, such as accepting credit purchases, is subject to the federal amount. Minnesota is one of just four states with a minimum wage lower than the federal government’s.
Ben Gerber, a lobbyist with the Minnesota Chamber of Commerce, said his organization has been “steadfast” in its argument that the state should aim for federal conformity, and nothing more. He argues that moving past the federal minimum would threaten the state’s competitiveness with surrounding states, and could mean a setback for a state economy still trying to right itself in the aftermath of the recession.
“These bills are fairly substantial in where they go,” said Gerber, referring to both the House and Senate editions. “I think you have to be fairly careful about what you are going to set in motion in our state economy.”
Other advocates for leaving the state’s wage unchanged, or joining the 22 states that abide by the federal minimum, say the higher levels would leave businesses with difficult choices. As posited by Bruce Nustad, president of the Minnesota Retailers Association, the prospect of higher pay to employees could make a business owner set aside plans for expansion or capital investments, not to mention the possibility of reduced working hours. Nustad disputes claims that most retail store owners can comfortably weather the proposed wage increase.
“There’s this fantasy perception that there’s this incredible amount of [profit] margin in retail,” Nustad said. “I don’t know where that came from.”
Along with retail outlets, restaurant owners have been some of the most consistent critics of the proposals. Their opposition has been made clear through a series of opposition testifiers in committee hearings, and was bolstered by a member survey that the Minnesota Restaurant Association (MRA) released on Tuesday. Restaurant owners are seeking a provision to factor in servers’ tips, allowing service industry employees to be paid less than the minimum wage by the restaurant itself, so long as hourly pay totaled out to $12 per hour or more. Amendments to add the so-called “tip credit” have been floated, but rejected, in both the House and Senate.
According to the MRA’s survey of 115 restaurant owners, some 90 percent plan to increase menu prices if the minimum wage bill passes, while another 59 percent say they would hold off on hiring additional staff.
Worst-case scenario warnings don’t pass muster with Winkler, who said the “overwhelming majority” of economic research has shown the minimum wage level has only a slight impact, if any, on unemployment. While he concedes that a steep overnight change could shock some businesses, Winkler points out that his own proposal would gradually raise the rate to $9.95 by 2015, with inflation adjustments taking over the following year.
“We’re talking about phasing this in over a number of years in a very predictable way, so that businesses have a chance to adjust,” Winkler said.
Senate support a limiting factor
When discussing the bill Winkler managed to get through House committees, Eaton sounds almost envious, saying she wished she could have pushed a similar proposal. Instead, she scaled back her bill’s targets, largely to help clear the Jobs, Agriculture and Rural Development Committee, where a bloc of moderate Democrats had opposed the higher boost as well as the inflation adjustment.
Eaton said she is still weighing whether to reinsert a greater number and the inflation provision when the bill hits the Senate floor, though the Senate majority whip said her final vote count would be the determining factor on those decisions. The issue creates a divide between urban and suburban Democrats, she said, with the latter taking a more business-aligned approach to the topic of wage hikes.
“Several senators from [the suburbs] were endorsed by the [Chamber of Commerce],” Eaton said. “They’re a little skittish about offending them, and I don’t blame them.”
Jennifer Schaubach, legislative director for the AFL-CIO, has found a similar attitude among Senate DFLers, whom she says are more prone to listen to business interests.
“We’re working to change that,” Schaubach said, “but it’s kind of the way we’re looking at it.”
Schaubach and other labor lobbyists are working to convince senators who might either be on the fence on the issue, or whose authoritative voices could convince others to vote in favor of a wage increase.
Schaubach said she had recently met with Sen. Kent Eken, DFL-Twin Valley, and told him about the drop in the turnover rate at the San Francisco airport after that city raised its minimum wage above $10 an hour. Less turnover, Schaubach pointed out, means businesses spend less on hiring and training new employees.
Bernie Hesse, political director with United Food & Commercial Workers Local 789, says the wage debate gives the Democratic majorities a chance to salvage what might otherwise be a “crummy session” for the labor groups that supported them in their 2012 election efforts.
“It’s like I said to Sen. [Roger] Reinert,” Hesse said, recalling a recent conversation with the Duluth DFLer. “I’m unfamiliar with anybody that’s ever lost an election because they voted for a higher minimum wage.”
The Senate bill amounts to a near-total disappointment for Kris Jacobs of the liberal Jobs Now Coalition, who describes that version of the legislation as the “Chamber bill” — as in, Chamber of Commerce, who she assumes would be pleased with the plan.
“The problem we’re having at the Capitol is low expectations,” Jacobs said. “I think the Senate Democrats might have thought they were being generous by supporting the [$7.75 per hour] rate.”
For her part, Eaton, too, wants to see the wage hike move higher than it would under her current bill, saying that could be accomplished through a conference committee to reconcile the two bills. Setting a slightly lower threshold than the bill’s labor boosters, Eaton said she’d like to see a bill that includes inflation adjustment, and sets a minimum wage at “eight bucks” or more. Gov. Mark Dayton has said he would peg a fair minimum wage level at $9.00 or $9.50 an hour, though that won’t stop Winkler’s pursuit of his own, higher figure.
“We’re aware of [Dayton’s] position,” Winkler said. “My sense is the governor is going to support what the legislature can pass.”
Nustad thinks his retail members are already bracing for some level of change to the law, but will watch closely the battle over the final figure.
“I think it’s a reasonable conclusion that the Minnesota state minimum wage is going to be modified,” Nustad said. “We’re going to work our best to keep that minimum wage in congruency with the federal level. I suspect we might end up above that — but I certainly hope not to the level that’s in the House now.”