ST. PAUL — An estimated 350,000 Minnesotans would get a wage increase as part of a deal announced Monday by DFL legislative leaders to boost the minimum wage to $9.50 per hour by 2016.
Local labor leaders praised the deal, saying it will go a long way toward improving the lives of working Minnesotans.
"The principles of this is an honest day's pay for an honest day's work, and people shouldn't live in poverty when they are working a full-time job," said Russell Hess, secretary-treasurer of the Southeast Minnesota Area Labor Council.
But businesses groups railed against the proposal, saying it will hurt small businesses and lead to fewer jobs.
"This is another disincentive for Minnesota businesses to stay and expand in Minnesota. The proposed changes in the wage will disproportionately affect businesses in Minnesota, our border community, young people and entry-level workers," said Bill Blazer, Minnesota Chamber of Commerce's senior vice president for public affairs and business development, in a statement.
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Minnesota's minimum wage of $6.15 per hour is one of the lowest in the nation and below the federal minimum wage of $7.25 per hour. Under the DFL plan, the minimum wage increase would be phased in starting with $8 per hour by August 2014, $8.50 per hour by August 2015 and $9.50 per hour in 2016. The deal includes a lower minimum wage rate for small businesses, set at $7.75 per hour for businesses with less than $500,000 in gross sales in 2016. It also includes a youth minimum wage of $7.75 per hour for 16- and 17-year-olds. The Senate is expected to vote on the minimum wage plan today.
For two months, Democrats sparred over whether the minimum wage should be indexed to inflation. House Democrats had pushed for the automatic increase in the wage while Senate Democrats balked. In the end, the DFL plan would index the wage to inflation beginning in 2018. But it also allows the Commissioner of the Department of Labor and Industry to suspend the inflationary increase for a year if economic indicators show that a downturn in the economy might be imminent.
Rep. Jeanne Poppe, DFL-Austin, served on the conference committee that helped negotiate the minimum-wage deal. She said she had been pushing hard for the final plan to consider the $7.75 per hour rate for small businesses and to include a youth wage. While she initially was skeptical of plans to index the wage to inflation, she said she has come around because it makes the increase more gradual instead of a sudden jump in the wage.
"It's not a large leap every year and it does have the fallback that if something is going wrong in the economy, that it can be taken care of," Poppe said.
Republicans say the plan goes too far. Sen. Dave Senjem, R-Rochester, said he is opposed to putting increases to the minimum wage on autopilot.
"A lot of small-town restaurants are really going to suffer with this proposal," he said.
Absent from the DFL plan is a tiered minimum wage plan for tipped workers. The Minnesota Restaurant Association has been lobbying for a plan that would keep tipped employees at the federal minimum wage of $7.25 per hour, and guarantee that employees make at least $12 per hour with wages and tips.
Dan McElroy with the Minnesota Restaurant Association said his organization expects that if the minimum-wage bill passes without a tiered wage for tipped employees, restaurants will reduce servers' hours and start relying more on iPads and other technology for ordering meals to reduce costs.
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"We care deeply about preserving these good-paying jobs and having competitive prices in border communities," he said.
Wisconsin sets the minimum wage for tipped employees at $2.33 per hour.
Sen. Carla Nelson, R-Rochester, said failing to include a tip credit for tipped employees is a big mistake.
"I think it's essential because otherwise we are going to see fewer tipped employees, which I don't think is the intent of this bill," she said.
Rep. Kim Norton, DFL-Rochester, said some of her concern regarding tipped workers have been eased because a lot of small restaurants would qualify for the lower small business minimum wage rate of $7.75 per hour. She said it is critical for the state to increase the minimum wage by a robust amount.
"I feel really strongly that the amount needs to be high enough that we get people off public programs," she said, "and we had some data that while it certainly wasn't going to get everyone off public programs, $9.50 takes us much closer in that direction."
