Why a $15 federal minimum wage would be disastrous for rural Minnesota
As I have written before, hiking the federal minimum wage is illogical; it takes no consideration of income differences among states. So this recent move to shoot down the $15 minimum wage is a good development.
It is quite possible, however, that efforts to raise the federal minimum will continue in the near future. But here is why going that path would be disastrous, especially for low-income areas like rural Minnesota.
Income differences should be considered
According to the Bureau of Economic Analysis, in 2019, Minnesota had a per capita personal income of $58,834. However, this masked significant differences among counties.
Hennepin County, for instance, had the state’s highest per capita personal income at $76,552. This is more than twice the per capita personal income of Mahnomen — $36,427. In 2019, Minnesota had only two counties with a per capita personal income exceeding $70,000. Seven counties had an income per capita greater than $60,000, and 41 counties had a per capita personal income less than $50,000. Commensurate with these differences in levels of income, the cost of living was also different among the counties.
The Department of Employment and Economic Development (DEED) estimated that in 2019, a family of three with two full-time working parents faced a total living cost of $74,328 in Hennepin County. In contrast, the same family living in Mahnomen County only needed $50,580 for basic needs. Consequently, the required hourly wage to afford the cost of living in Hennepin County was $17.87 in 2019. In Mahnomen County, it was $12.16. All but one of the counties requiring a living wage of $15 or more per hour were in the metro region.
Rural areas are at higher risk
It’s easy to imagine in this case why raising the minimum wage to $15 would be more damaging to Mahnomen and all the other counties in rural Minnesota.
As the BEA data shows, residents in Hennepin County have higher incomes, so they would be able to absorb a rise in living costs. This does not mean that these counties would get off scot-free. Minimum wage hikes enacted in Minneapolis and St. Paul have contributed to massive job losses, particularly in the restaurant industry.
Residents in rural Minnesota, who have lower incomes, have a limited ability to absorb higher prices associated with a wage increase. So, the negative impact of a $15 minimum wage would merely be more pronounced.