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Citizens League report shows that Saint Paul should tread carefully over the minimum wage

Saint Paul’s mayor Melvin Carter is committed to following Minneapolis in enacting a $15 an hour minimum wage. Economic theory and empirical evidence indicate that this would be bad public policy which would hurt the very workers it seeks to help.

To add to this, a new report by Minnesota’s Citizens League paints a picture at odds with the economic utopia which $15 advocates offer. The Pioneer Press provides a good summary of some of the key findings:

-Most of St. Paul’s large employers such as Allina Health, Ecolab, HealthPartners and Securian already pay the majority of their workers at least $15 per hour. Private colleges do the same for full-time employees but not for part-time student workers, who earn about $10.

-Nonprofits that employ disabled people at a special wage that is at or below the statewide minimum worry they will not be able to cover increased costs. They said lay-offs would disrupt their staff-to-client ratios, losing them clients.

-Some franchise and small business owners such as bookstores said their prices were set by publishers and national brands, so they cannot raise prices to cover increased labor costs.

-Without an exemption for young people, a small, family-run restaurant worried about no longer being able to afford to pay summer youth.

Speaking through an interpreter, a low-wage retail janitor “felt strongly that no one should be exempted, including youth workers, believing teens should be able to make the same as adults, knowing that some support their families,” according to the report.

Meanwhile, some immigrant-owned businesses were insistent that they did not want a $15 minimum wage increase because they cannot financially support the increase in labor costs, according to the report.

A manufacturer that pays an employee $12 an hour may also have to pay $6 to the staffing agency for a total of $18 an hour to fill just one position, according to the report.

The report also notes that if St. Paul delivers a set of minimum wage rules that differ from that of Minneapolis and the state of Minnesota, employers who operate in multiple cities will have to juggle three types of record-keeping.

Other aspects of the report focused on nursing homes and senior housing, youth workers in non-profit training settings, and restaurant workers who support or are opposed to a credit for tipped employees.

There is no such thing as a free lunch

There is a persistent notion among supporters of minimum wage hikes that they represent a ‘free lunch’. They argue that big businesses, awash with cash, are paying their workers less than a ‘living wage’. All a minimum wage hike will do, they say, is switch money from rich capitalists who already have enough to poor workers who don’t. Who doesn’t like that?

On this evidence, that picture is incorrect. Big businesses, in fact, seem to be paying higher wages. Instead, hiking the minimum wage in Saint Paul to $15 per hour will disproportionately hit smaller businesses, franchises, and nonprofits. It will not be some cigar smoking, top hat wearing robber baron who will be sweating over his accounts trying to cover the increased wage bill by buying himself a bottle less of Dom Perignon. It will be small businesses owners, many of them immigrants or ethnic minorities on places like Rice or University Avenue, who will be in the back room of their small shop wondering how they will fund Mayor Carter’s generosity. And in many cases, they won’t be able to.

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

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