Minnesota State Wire

Minnesota is poised for its annual minimum wage increase but wage raises in Minneapolis and St. Paul has some people worried.

Minimum wages in the Twin Cities will climb to $15 an hour but will be phased in over five years. Regardless of the time frame, it will hurt the small business said Mike Hickey, state director of the National Federation of Independent Business (NFIB).

“We are very concerned about what Minneapolis and St. Paul did on $15,” he said.  

Hickey said small restaurants, in particular, will be adversely impacted, saying the tip credit issue is significant. A restaurant in the Twin Cities will have to pay their waitstaff the $15 minimum wage standard plus whatever tips they receive.

“A lot of these small unique restaurants are going to go out of business,” he said, adding that these food establishments might have to have to raise menu prices 50-60 percent.

“The retailer really gets hurt and the smaller restaurants get hurt,” Hickey said. He also noted that advocates of the $15 minimum wage hike should not be surprised when these restaurants close down due to their inability to absorb a 58 percent increase in their menu prices.

Small businesses are specifically vulnerable to government ordinances and have to put forth great effort in overcoming these obstacles wrote Lauryn Schothorst, Minnesota Chamber of Commerce director of labor-management policy, in an e-mail statement to the Minnesota State Wire.

“We continue to see aggressive local mandates passed on private-sector employers – not just setting wages but dictating benefits,” she wrote. “The Minnesota Chamber remains opposed to this growing trend. Local government mandates are especially troubling as they create a patchwork of local laws for businesses to navigate across the state.”

As for larger businesses or more industrial-based ones, Hickey said a problem arises when there are current employees earning $15-$18 an hour and a new hire with limited experience starts at $15 per hour.

Hickey did say that most people making minimum wage are not the head of the household but a second, third or fourth income in the home.

The state minimum wage will expand to $10 an hour for large companies, defined as enterprises reaching a $500,000 plus in gross revenue. For small businesses — less than $500,000 in gross revenue per year — the wage will increase to $8.15.