Gov. Dayton's comments on minimum wage have small business community very concerned
Tuesday, September 10, 2013 4:02 AM
Recently at the State Fair, Gov. Dayton said, "I believe the minimum wage should be at a level so that someone working full-time can support a family of four above the poverty level and get more skills and more experience." His comments have the small business community very concerned about just how large a potential minimum wage increase could be next session.
The governor really has a basic misunderstanding of the purpose and historical application of the minimum wage law. It was never intended to be enough to provide for a family, especially a family of four, and it never can be. It is the starting wage from which workers are intended to move up after they gain experience, better skills and ultimately better paying jobs.
Recent data from the Bureau of Labor Statistics shows that only 2.8 percent of all hourly workers in Minnesota earn the minimum wage and another 1.4 percent earns less than the minimum; they were being paid the training wage. Gov. Dayton's comments show no understanding of the downside of a dramatic increase in the minimum wage. A hike to $9.50 would give Minnesota by far the highest wage in the country. In fact, at $9.50 per hour, Minnesota's minimum wage would be more than 30 percent higher than the rate in the four neighboring states. Think about that: the cost of creating an entry-level job in Minnesota will be 31 percent higher in Minnesota than anywhere else in the region and will create a competitive disadvantage for companies that employ minimum wage workers and have competitors in other states that also employ them.
The governor doesn't seem to understand that an excessive increase in the minimum wage will destroy job opportunities for teenagers and young adults who need those jobs to help pay for education and to break into the work force and obtain critical habits and job skills.
Unfortunately, the Minnesota House agrees with Gov. Dayton and passed this dramatic increase to $9.50 per hour last year. Worse yet, it tied future increases to an escalator clause, which is pegged to the Consumer Price Index. Thanks to the Senate leadership and other senators, Minnesota did not pass the measure. The Senate charted a much more moderate course and proposed an increase to $7.75 per hour. And it retained a lower wage for the smallest businesses that generally have very narrow profit margins. The National Federation of Independent Business Minnesota clearly appreciates the concern that Senate leaders and other members showed small businesses that can't afford a big increase in labor costs.
Advocates pushing for the increase seldom want to discuss the real facts. Here they are.
Only 21 percent of all minimum wage workers are family heads or spouses working full time.
Sixty-nine percent of workers earning the minimum wage are part-time workers.
Fifty-three percent of minimum wage earners range in age from 16 to 24.
Twenty-nine percent of minimum wage earners range in age from 16 to 19.
Fifty-six percent come from a family that has income above 200 percent of the federal poverty line.
The average family income of a minimum wage worker is $49,885.
If the Minnesota House actually gets its way, don't be surprised if job opportunities for high school kids, college students, and other young people disappear. In fact, research by economist David Neumark (U of Cal, Irvine) shows that unemployment among young workers rose the last time the federal minimum wage was increased. Studies show that for every 10 percent increase in the minimum wage, teen employment declines between 4.6 percent and 9 percent. And a new study by Ball State University shows that when the federal minimum wage was last increased, 550,000 part-time jobs disappeared.
Minnesota does not need to enact an excessive increase in the minimum wage that would give us by far the highest wage in the country. Hopefully, a more moderate course will be charted.
Mike Hickey is state director of the National Federation of Independent Business (NFIB) Minnesota.