When Governor Dayton signed the new minimum wage into law on April 14, it was the culmination of an extensive process of working toward a policy that will benefit Minnesota. It has also been an extensive process for me, as I have spent considerable time and effort speaking with constituents and business owners, as well as researching the issue to understand the impact for our state and my district. In the end, I believe this process has worked well, resulting in a policy that will continue our progress in building a strong economic future for Minnesota.
Minimum wage is always complex, which largely explains how Minnesota ended up being one of the four states with a minimum wage below the federal level. There has been widespread agreement that it needed to be raised, but to what level? Essentially, we try to balance a potential stimulative effect of putting more money into the hands of those who will spend it in local businesses, with the potential of pricing labor high enough to inhibit hiring and jobs. As I examined the issue more and more in depth, I focused on two basic questions. First, at what level would Minnesota become an outlier? Second, given the unique characteristics of my district, how would raising the wage affect constituents?
As far as the characteristics of my district go, I was reassured that given its location, the net effect would not cost jobs to residents. The question of finding a level I could support was influenced by the passage of time. When the Senate passed a bill for $7.75 in 2013, I voted for it and would have voted for a higher level then – but not $9.50. At that time, there were only two states with minimum wage set above $9, and to go to $9.50 would have made Minnesota an outlier. But in the past year, a number of states have passed higher minimum wage levels, and the national conversation has changed as well. With the phased-in approach that will raise the Minnesota minimum wage over three years, we will reach a level that properly balances the economic factors while giving businesses increases they can incorporate into their planning.
Planning concerns for businesses has been my primary focus in discussing whether and how the new Minnesota policy should include “indexing,” or automatic increases for inflation. As someone who has worked in the private sector for many years, I am very sensitive to these real concerns. But as I studied and weighed out whether or not labor costs should increase with inflation over time, it boiled down to a fundamental question: Should labor costs – over time – increase with inflation? I realized that business costs of all kinds increase over time, and managers are accustomed to planning with inflation factors that vary year to year for a variety of reasons. If our labor costs don’t keep up with the cost of living – as has been true of minimum wage and a number of other pay measures in recent decades – we limit the economic engine that is our working class customer base. And if we agree that labor costs should rise over time at a reasonable rate, isn’t it easier to plan a manager process that caps annual increases at 2.5 percent and provides allowances for economic downturn? I believe that the legislative process has worked as it is designed, having taken the time and factoring in the perspectives from around our state to arrive at a result that will ultimately benefit Minnesotans in the big picture and over the long term.
The final minimum wage proposal that I supported strikes a thoughtful and healthy balance: a phased-in wage increase that better reflects and ultimately fuels our economy; a managed and data-driven process to maintain the minimum wage over time; and smart specific accommodations for small businesses, for young workers, and for new employees in training.
The discussion about minimum wage often gets conflated with the larger issue of higher-paying jobs. Increasing the minimum wage won’t solve that challenge, and I remain committed to building the economic infrastructure that will ultimately lead to the kind of jobs and workforce we need to rebuild our middle class through economic development and education. But as we work on those basics, the increased minimum wage is an important step that will help Minnesota families.