Minnesota takes steps to make work pay

Minnesota passed two high-impact strategies for making work pay this year: increasing the Working Family Credit (our state’s Earned Income Tax Credit) and raising the minimum wage.

A new report from the Center on Budget and Policy Priorities commends Minnesota as one of three states (plus the District of Columbia) that advanced both of these policies this year.

According to the report, “EITCs and the minimum wage are twin pillars of making work pay for families that earn low wages. They boost income, widen the path out of poverty, and reduce income inequality. They also help to build a stronger future economy by putting children on a better path.”

These two improvements have the greatest success when used together. This is for several reasons:

  • The minimum wage and Working Family Credit reach overlapping but different groups of low-wage workers.
  • Increasing both at the same time creates a stronger income boost to those who need it most.
  • The benefits of these policies are timed differently. A minimum wage increase is seen in each paycheck, and helps families afford everyday expenses. The Working Family Credit comes once a year, and can be used for larger one-time expenses.

We’ve written before about how important the minimum wage and the Working Family Credit are so that working Minnesotans can make ends meet. The improvements made this session were long overdue. Stagnant wages mean low-wage workers earned about the same as 40 years ago, after adjusting for inflation. Minnesota’s minimum wage had lost much of its buying power and was below the federal minimum wage. Increasing the minimum wage and the Working Family Credit bring low-wage workers much closer to making ends meet.

The legislation passed this session will raise the minimum wage to $9.50 for large employers and $7.75 for small employers by 2016, and will then increase with the rising costs of basic expenses. As a result, 325,000 Minnesotans will have higher wages. More than 330,000 Minnesota families receive the Working Family Credit, which policymakers improved by conforming to federal improvements addressing marriage penalties and increasing the maximum credit.

Policymakers made important strides toward improving economic security for Minnesotans in the 2014 Legislative Session. The higher minimum wage and improved Working Family Credit will work together to boost our local economies and build ladders for low-wage workers to climb into the middle class.

-Clark Biegler

About Clark Biegler

Clark Biegler is the Minnesota Budget Project's policy analyst.
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