A $15 minimum wage would be especially hurtful to residents in Greater Minnesota.
A proposed increase in the federal minimum wage would hurt Minnesota’s economy more than it helps — hiking childcare costs by 13 percent, pushing business owners to lay off workers, and putting employment out of reach for tens of thousands of job seekers.
Despite its failure to pass the Senate, thanks to eight Democratic defectors, liberals are committed to cramming one through Congress eventually. A 48 percent jump, to $15 an hour, would hurt Greater Minnesota the most. Salaries tend to be lower there compared to the Twin Cities, and childcare costs would surge beyond reach for thousands of Minnesotans.
On average, families would pay $3,600 more per year to care for their kids, according to The Heritage Foundation. It’s even harder to afford this when families are earning less income. The nonpartisan Congressional Budget Office estimates a loss of 1.4 million workers, a 0.9 percent decrease, if $15 becomes the federal minimum wage.
Meanwhile, poverty would fall by 900,000 people — not enough to offset the jobs that go away. That’s a net loss overall. And it’s low-skill and young workers who would suffer the most, with many forced out of the job market.
One of the big problems with these arbitrary wage increases is the cost of living variance. Someone in St. Cloud can survive on a lower Minnesota wage than someone in St. Paul, who can get by on less than $15 an hour much more easily than someone in New York. In other words, a one-size-fits-all approach, although well-intended, doesn’t really work.
This is also why large corporations such as Amazon are not good examples of minimum wage success. Amazon — or Target, if we want to be local — can afford a higher wage floor, thanks to bigger profit margins. But the guy with the clothing store down the street, or the one with the mini mart around the corner, can’t do the same, especially in a small town.
Let’s say it’s $10 an hour for one clerk. Now Minnesota says, “At minimum, you must pay him/her and the other clerks $10.08.” Or worse, President Biden gets his way and all full-time workers must make at least $15 an hour.
The store owner now must consider several options. He can buy cheaper goods. But that could mean losing customers and money. Same if he moves his store to a place with cheaper overhead costs. Or he could hire a bunch of part-time workers and no full-time staff, or fewer staff altogether, which means workers lose. And before you say he should take a hit to his wallet, keep in mind that the average annual income for a small business owner is less than $70,000, according to the compensation platform PayScale.
Also understand the importance of small businesses to our economy. They accounted for 99.7 percent of all enterprises with paid employees, 47.1 percent of all workers, and (on the net) 65 percent of all new jobs created in 2020, according to the Small Business Administration.
Statewide, there is already a wage increase — a fraction of a percent, to $10.08 hourly for big companies and to $8.21 for small companies. And in the Twin Cities, the increase will mirror the rate Democrats want nationally. It has already started for big businesses located in the state’s capital city, and small businesses must follow suit by 2025. Across the river, the target dates are 2022 for big businesses and 2024 for small ones.