Minimum wage increase close to the finish line

Minnesota legislators agreed yesterday to increase the state’s minimum wage. Working Minnesotans shouldn’t be in poverty, and increasing the minimum wage is an important step toward a future of more broadly shared prosperity. An increase in the minimum wage reaches Minnesota workers who tend to be left behind in our economy, and boosts their purchasing power.

Minnesota has been one of just a handful of states with minimum wages below the federal figure of $7.25 an hour, so that federal rate is what many minimum wage workers in our state currently earn.

That will change this summer, when new state minimum wage standards begin phasing in over a two-year period:

  • Large employers: $8.00 per hour starting on August 1, 2014, $9.00 starting on August 1, 2015, and $9.50 starting August 1, 2016.
  • Small employers: $6.50 per hour starting on August 1, 2014, $7.25 starting August 2015, and $7.75 starting August 2016.
  • Training wage (for employees under age 20 for the first 90 consecutive days of employment): $6.50 starting August 1, 2014, $7.25 on August 1, 2015, and $7.75 on August 1, 2016.
  • Two other wage tiers are created: youth wage (workers under age 18), and working under an Exchange Visitor non-immigrant visa: $6.50 starting August 1, 2014, $7.25 on August 1, 2015, and $7.75 on August 1, 2016.

For purposes of the minimum wage, Minnesota will match federal definitions for small and large employers. A large employer has annual gross sales over $500,000, and a small employer has gross sales below that amount.

Minnesota’s minimum wage will increase each year based on inflation starting in 2018 (commonly called “indexing”), so that it keeps up with the cost of basic necessities. The annual increase cannot be more than 2.5 percent. The state has the option of suspending an annual increase if economic indicators show potential for a substantial downturn in the state’s economy. In the years after a wage increase is prevented, the state can make supplemental increases in the minimum wage to catch up.

The minimum wage agreement is in House File 2091, and is expected to be voted on in the House and Senate this week.

-Caitlin Biegler

About Clark Goldenrod

Clark Goldenrod is the Minnesota Budget Project's senior policy analyst.
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