House jobs omnibus bill lowers wages, threatens job quality and cuts affordable housing

Legislators are busy putting together the FY 2016-17 budget, but some of the budget plans coming out do not help build a state of shared opportunity. Minnesotans need jobs with good wages and good benefits, affordable housing, and a strong Unemployment Insurance system for when layoffs happen, but the Minnesota House’s employment and economic development omnibus budget bill (House File 843) includes some bad news for Minnesota workers.

Among the disappointing elements of the House’s jobs and economic development proposal are:

  • a tip penalty that would reduce wages for some minimum wage workers;
  • a “local interference” provision that would prohibit higher job quality standards at the local level;
  • cuts to affordable housing; and
  • sharp reductions to the state’s Unemployment Insurance fund that threaten the state’s insurance system for unemployed workers.

The bill sets a lower minimum wage, or tip penalty, for workers who receive $4.00 or more in tips per hour. The minimum wage sets a wage floor among all workers, and for tipped workers provides a level of stability in their incomes. This provision would erode the progress our state made last session when policymakers passed a long overdue raise to the state’s minimum wage so that workers’ wages can catch up and keep up with the cost of living.

The “local interference” provision in the House bill prevents local governments from setting higher wage and job quality standards than state law. For example, if a city wanted to set a higher minimum wage or expand access to earned sick leave beyond what the state requires, they would be prohibited from doing so.

Also included in the bill are significant cuts to funding for affordable housing. In FY 2016-17, there’s a $5 million cut to the Challenge Fund, which expands affordable workforce housing in areas of job growth. The bill also imposes new requirements on how the Challenge Fund is allocated between Greater Minnesota and the Twin Cities metro area, potentially limiting the ability of the state to allocate housing funds to areas with the greatest need. The Housing Trust Fund, which increases affordable housing and provides rental assistance, is cut by $2.4 million in FY 2016-17. Family Homeless Prevention Assistance is also cut in FY 2016-17 by $1.3 million.

The House bill also threatens the ability of the state’s Unemployment Insurance system to pay benefits to jobless workers. Unemployment Insurance replaces a portion of lost wages for workers after they have lost a job through no fault of their own. It also helps keep the state’s economy going in times of high unemployment because it helps jobless workers continue to pay rent, buy groceries and put gas in their cars. To fund this insurance system for our workforce, employers pay an Unemployment Insurance tax. However, the House proposal greatly reduces Unemployment Insurance taxes for employers and caps the size of the fund. These changes are estimated to decrease Unemployment Insurance contributions by $430 million in FY 2016-17.

Fortunately, it’s not all doom and gloom. The bill would remove a provision in current law that allows a lower minimum wage to be paid to hotel or resort workers under a summer work visa who receive a lodging or food benefit. This provision marks at least one step toward bringing all workers to a more adequate minimum wage.

The House employment and economic development bill will be up for a vote by the full House today.

-Clark Biegler

About Clark Biegler

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