Why a $15 federal minimum wage would be disastrous for rural Minnesota

Earlier today, the United States Senate voted to reject including a $15 federal minimum wage provision in the Stimulus package. This comes to a couple of days after the Senate Parliamentarian ruled against inserting the minimum wage provision in the stimulus bill.

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.

Rural Minnesota has low income

According to the Bureau of Economic Analysis, in 2019 Minnesota had a per capita personal income of $58,834. However, among the individual counties, there were significant differences. Hennepin County, for instance, had the state’s highest per capita personal income–$76,552. This is more than twice the per capita personal income of Mahnomen–$36,427.

In 2019, Minnesota had two counties with per capita personal income equal to or greater than $70,000; 7 counties with per capita personal income equal to or greater than $60,000; 41 counties with per capita personal income less than $50,000. Commensurate with these differences in levels of income, costs of living are also different among counties in Minnesota.

The Department of Employment and Economic Development (DEED) estimated that in 2019, a family of three with two full-time working parents and one child 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, that is if both parents are working was $17.87 in 2019. In Mahnomen County, it was just $12.16. In fact, all but one of the counties requiring a living wage of $15 or more per hour were in the metro region.

Therefore it is not hard 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. For one, residents in Hennepin county have higher incomes, so they would be able to absorb a rise in living costs much easier. But of course, this does not mean that there would be no negative consequences. We have already seen Minneapolis and St. Paul face negative impacts after they enacted ordinances to gradually raise their minimum wage to $15. What it means is that these effects that have been seen in the Metro Area would be even more pronounced in rural Minnesota.

Residents in rural Minnesota, as I have explained, have lower levels of personal income. Therefore they have a limited ability to absorb higher prices that are associated with a wage increase. This means that most businesses in rural areas will be more likely to cut employment or shutdown. In turn, low-skilled, low-wage workers will be the most affected by a law intended to help them.

Minimum wage laws are harmful regardless

Minimum wage laws are harmful. They kill jobs and reduce job opportunities for low-skilled, low-income workers. Those negative impacts just happen to be more severe in some regions than others.