The stalemate between DFLers in the House and Senate over the minimum wage ended Monday as leadership from both chambers announced a deal to bump the minimum wage to $9.50 over the next three years.
The agreement also provides for automatic increases based on an inflation index. That aspect of the proposal – favored by House DFLers but resisted by their counterparts in the Senate – was seen as the main point of contention.
Under the proposed legislation, such indexed increases would go into effect in 2018 and be capped at 2.5 percent annually.
Majority leader Sen. Tom Bakk, DFL-Cook, called the bill a “pretty good compromise” and said he is confident it has enough support to clear the Senate.
In response to Senate concerns about the inflation index, the House made one notable concession of its own. In the event of an economic downturn, the commissioner of the Department of Labor and Industry will be empowered to freeze the minimum wage for up to one year.
Bakk said that this “off-ramp” provision means that future decisions will be based on real data, not “political whims of people at the Capitol.”
The minimum wage for small businesses, defined as those businesses with less than $500,000 in gross annual sales, would rise from $6.15 an hour to $7.75 by 2016. That rate would also apply to 18- and 19-years-olds employed by large businesses during a 90-day training period and to 16- and 17-year-old foreigners working under a J-1 visa.
In response to questions from reporters, House Speaker Paul Thissen, DFL-Minneapolis, and Bakk both categorically denied that the deal was connected in any way to the recent resolution of the House-Senate standoff over plans for a new Capitol Office Building to house senators.
Those tensions were highlighted several weeks ago when Gov. Mark Dayton publicly rebuked the Senate for allegedly holding up a $500 million tax cut bill in a ploy to force the House to green-light its new offices. On Friday, the House Rules and Legislative Administration Committee approved the $77 million building plan.
Following the announcement of the minimum wage deal, two Republican gubernatorial candidates – Sen. Dave Thompson, R-Lakeville, and Rep. Kurt Zellers, R-Maple Grove – took turns at the microphone to denounce it.
Thompson said the wage hike will increase unemployment, especially among the young. He also objected to the inflation index, saying it cedes rightful legislative authority to the executive branch. If elected, Thompson said he would work to eliminate the index.
In a similar vein, Zellers called indexing “one of the most dangerous things you can do” and said he favors setting the minimum wage at the federal rate of $7.50 an hour.
Zellers said he is concerned about the impact of the wage hike on younger works, restaurant workers and businesses located near bordering states with lower wages.
He also asserted that the deal represented “end of the session horse trading” and illustrated “the ugly side of politics.”
Dan McElroy, a former commissioner of the Department of Employment and Economic Development (DEED) who now represents the Minnesota Restaurant Association, said the group has “grave concerns” about the inflation index. The association had also hoped that lawmakers would provide for exemptions for tipped employees, he said.
McElroy said he does not think the new minimum wage would lead to “huge job losses” but expects that some restaurant employees will lose hours and some restaurants will automate services in an effort to offset the cost of the wage hike.
Backers of the wage hike, meanwhile, hailed the agreement as “a really good step.” Peggy Flanagan, co-chair of the Raise the Wage Coalition, said the bill would not only help the approximately 350,000 minimum wage workers in the state but also the 137,000 children who live in households with minimum wage earners.
In a prepared statement, Gov. Dayton said, “I look forward to signing this legislation into law.”