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Minneapolis’ small businesses will pay the cost of a $15 minimum wage

In a recent editorial for the Star Tribune, Rep. Keith Ellison wrote that Minneapolis should raise its minimum wage to $15 per hour. “Our country is ready, and Minneapolis is ready”, he proclaimed.

Rep. Ellison doesn’t seem to have considered whether or not employers are ready. But who cares about them? They’re all vicious capitalists in charge of multi-billion dollar corporations, aren’t they?

Well, no. Today the Star Tribune offers the following two examples

Elias

Elias is an avid Bernie Sanders supporter and calls herself “a bleeding heart liberal” who uses her nonprofit art studio and classes to encourage creativity among her neighbors, especially seniors in nursing homes and kids and adults with disabilities or special needs.

“Everybody is welcome here,” Elias said.

Yet Elias is among small-business owners in south Minneapolis who find themselves emotionally and politically conflicted between their progressive values and the city’s push for a mandatory minimum wage of $15, without allowing for a “tip credit,” which would exclude workers who make more than that because of gratuities.

“I own a business here because of all the unique small business that are in Tangletown, and I think, ‘How are they all going to stay open?’ said Elias, who starts her workers at $10 an hour but raises their pay to $15 or more quickly.

Elias is one of the local business owners who were featured in a video by the neighborhood business association to give voice to their concerns. In these all-or-nothing times when progressives are being criticized based on one issue, I thought they were worth a listen.

Heather

A few blocks away, Heather Bray has similar feelings. She owns the Lowbrow bar and restaurant with her wife, Jodi Ayres. Bray is a “proud Hillary lover” who agrees with the need for a livable wage but every day faces the challenge of juggling the budget and trying to be fair to all of her employees.

“One of the most frustrating things for me has been how [the issue] has affected me on an emotional level,” said Bray, who promotes “locally farmed and sustainably grown” food.

The restaurant even advertises on its front window that every Monday the owners give 10 percent of their profits to good causes.

Bray said she starts non-tipped employees at $15 an hour, and she estimated her full-time servers earn between $42,000 and $50,000 per year with tips. She said many progressive business owners she knows are reluctant to be visible on the issue because they fear customers only listen to the simplistic slogans and not the actual arguments.

“We feel our position is very nuanced,” said Bray. “It’s easy to just say ‘$15 now’ and get people to agree with you.

 “I have been a proud, proud liberal all my life. I’m gay, I’m progressive, I’m a poster child for liberalism, come on. So it’s difficult to be put into a box on one issue and be trolled and harassed [by progressives]. We’ve had people give us one-star ratings because of this.”

Elias calls her business “a labor of love. I make less than everyone who works here,” she said. If she has to pay everyone more, she will likely have to cut back on programs that help people with disabilities and special needs.

“I don’t think people fully understand the outcome of the issue,” Elias said. “I came from poverty, from a large family with a dad who was a teacher. I worked my way up through college waiting on tables. I just know how hard it is to keep a business afloat. It’s not black and white, it’s not one-size-fits-all.”

Bray said city officials will say “behind closed doors” that they understand the difficulties the business owners face, but there are not enough “no” votes to block it. Bray said most of her friends are progressive, and it’s only after she describes how her business could be affected that they start to understand the other side.

“It’s really easy just to say ‘15 now,’ who can argue with that?” Bray said.

So what? 

If you mention employers like Elias and Heather to supporters of higher minimum wages, they will often respond with a quote from FDR. When he signed the National Industrial Recovery Act into law in 1933, Roosevelt said

…that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country…and by living wages I mean more than a bare subsistence level – I mean the wages of decent living.

In other words, Elias and Heather can take a hike.

Which businesses do have the right to continue in the US? Bigger ones. As Heather told the Star Tribune,

 “People with big corporate footprints will survive this,” Bray continued. “Our customers are our neighbors, and they are very budget conscious. We are either going to go out of business or eliminate the tipping model altogether.”

Trashing small businesses in this way harms the very workers minimum wage proponents say they want to help. Economists David Neumark and William L. Wascher surveyed two decades of research into the effects of minimum wage laws. They found that “minimum wages reduce employment opportunities for less-skilled workers…(that) a higher minimum wage tends to reduce rather than to increase the earnings of the lowest-skilled individuals…(that) minimum wages do not, on net, reduce poverty…(and that) minimum wages appear to have adverse longer run effects on wages and earnings”.

It easy to stand in a legislature and declare that a business owner should pay their employees $15 an hour. The legislator doesn’t have to cover the nut. It is more difficult for the small business owners. They have to spend long hours poring over their books to make the numbers add up. And if they can’t finance the legislator’s promises, well, they can take a hike.

Higher minimum wages hurt the very unskilled workers they are intended to help. They also hurt small businesses rather than big ones. Minneapolis City Council’s discussion of the $15 per hour wage should be based on economic analysis, not windy political rhetoric.

John Phelan is an economist at Center of the American Experiment.

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