The new federal minimum wage hike: a bigger bite in Minnesota?

Friday’s federal minimum wage hike to $7.25 an hour may have a bigger effect on Minnesotans and Minnesota business than you think.

With the hike, Minnesota’s large employer minimum is now $1.10/hr under the feds and small employer minimum is $2/hr less. Ours is one of only four states with a state wage lower than the feds (five have no law).

What does it mean? Here are some thoughts:

Statewide, it may only touch about five percent of the workforce. The Economic Policy Institute, a liberal research group, estimates the law will affect 79,000 Minnesotans directly and 44,000 indirectly.

About 2.6 million people were employed in Minnesota in June.

Dan Marshall is co-owner of Peapods Natural Toy Store in St. Paul and a board member of the Metro Independent Business Alliance. He’s also a source in our Public Insight Network.

He told us today:

I think the increase in the federal minimum wage law will have very limited impact on locally owned small businesses.

Although there may be some exceptions, particularly with restaurants, most members of MetroIBA are already paying their employees well above minimum wage.

Small businesses, including ours, tend to rely heavily on quality staff and do not have the HR and training resources to accommodate the high turnover that comes with paying minimum wage. Furthermore, the law exempts businesses grossing less than $500k, which includes many of our member businesses.

The problem is that the cutoff may be trickier than people realize.

The U.S. Labor Department’s FAQs notes also notes the law:

…applies to employees of smaller firms if the employees are engaged in interstate commerce or in the production of goods for commerce, such as employees who work in transportation or communications or who regularly use the mails or telephones for interstate communications.

Together, it means nearly all Minnesota businesses — including many mom-and-pop shops — will fall under the federal law and the higher minimum wage, says Mary M. Krakow, an attorney with the Minnesota law firm Fredrikson & Byron.

I’m hoping to come back with more on this Monday, so stay tuned.

Meanwhile, if you’re a business or an employee who has some thoughts on how the minimum wage hike affects you, I’d love to hear from you.

Post below or click here and use this form. It’s built by our friends at Marketplace radio, but we share the info and I’ll be sure to see it.

Meanwhile, check out the detail below comparing Minnesota to other states.

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Here’s an interesting comparative chart (thanks to Mary Krakow and Fredrikson & Byron)


July 24, 2007

July 24, 2008

July 24, 2009

Federal

$5.85

$6.55

$7.25

Minnesota
Large Employer
($625,000 or more in annual gross sales made or business done)

$6.15

$6.15

$6.15

Minnesota
Small Employer
(less than $625,000 in annual gross sales made or business done)

$5.25

$5.25

$5.25

Wisconsin

$6.50

$6.50

$6.50

Iowa

$6.20

$7.25
(effective January 1, 2008)

$7.25

North Dakota

$5.15

$5.15

$5.15

South Dakota

$5.15

$5.15

$5.15

Illinois

$7.50
(effective July 1, 2007)

$7.75
(effective July 1, 2008)

$8.00
(effective July 1, 2009)
and $8.25
(effective July 1, 2010)

California

$7.50

$8.00
(effective July 1, 2008)

$8.00


Certain exceptions to minimum wage apply to workers under the age of 20 for their first 90 days of employment and, in some states, to tipped employees and agricultural and disabled workers.

U.S. Department of Labor map of minimum wage

Clickable map of America



Green

States with minimum wage rates higher than the Federal

Yellow

States with no minimum wage law

Blue

States with minimum wage rates the same as the Federal

Red

States with minimum wage rates lower than the Federal

Brown

American Samoa has special minimum wage rates