Why the Minneapolis Labor Standards Board is a bad idea

Some good news: the Minneapolis City Council failed to override Mayor Frey’s veto on creating a Labor Standards Board, which “would recommend pay, safety and equity regulations for employers” in Minneapolis.

The bad news: work on creating the board will continue.

As it turns out, Frey vetoed the ordinance because the board put forward by the city council did not have enough representation from business people. Additionally, some city council members voted no on overriding Frey’s veto merely due to limited public engagement.

Mayor Frey has put forward a proposal for a board that increases participation among business people. As reported by CBS News,

“If we want this Labor Standards Board to work, business participation isn’t just important, it’s essential. Under the Council’s proposal, business participation is negligible — and everyone knows that’s not going to work,” Frey said. “Council must pass a board that is balanced and inspires collaboration from both labor and businesses.”

Frey’s proposal would include an equal split between employees and employers on the board, with an equal number of appointments made by the City Council and the mayor. He also put forward that the supermajority of board members must agree on recommendations before they are presented the council.

While having equal representation between employers and employees could create a more balanced board, it doesn’t change the fact that establishing a new bureaucratic entity that merely exists to push for more regulations on Minneapolis’ labor market is a bad idea.

Creating a labor board — especially one built on the ideas of equity and safety — would likely mean more regulations in Minneapolis. And more regulations could lead to poor economic performance, possibly for the entire state economy.

More regulations in the Twin Cities = poor economic performance, possibly for the entire state economy

Minnesota’s economy has been struggling for the last decade. As John Phelan recently illustrated, while Minnesota used to brag about a higher-than-US-average GDP (Gross Domestic Product) per capita, that advantage is now gone. For the first time in 2023, Minnesota’s GDP per capita fell below that of the US average.

Why is this?

Numerous surveys of business people, as well as data, consistently show that rising taxes and burdensome regulations are killing entrepreneurship in Minnesota, causing the state’s lagging economy.

As American Experiment previously pointed out,

Favorable rankings by CNBC can give local politicians good news to cling to. But when looking at the factors that matter for business creation, innovation, and productivity growth — such as taxes and regulation — Minnesota consistently ranks at the bottom, making it a less competitive state for investment. On the other hand, states that Minnesota appears to beat, such as Florida and Texas, rank at the top on these important metrics.

The Twin Cities Metro is the economic engine of the entire state of Minnesota. Ergo, economic trends in that part of the region will most likely be mirrored by the rest of the state.

It should be concerning, therefore, that instead of creating an environment that is friendlier to businesses, the Minneapolis City Council wants to create a board, which by the looks of it, would mostly exist to create new rules for businesses, some of which are already suffering.

The Minnesota hospitality industry, for instance, experienced low revenues over the summer. Establishments in the Twin Cities were especially hard hit. While some of the causes for this concerning trend are seasonal and will likely go away, such as road construction, others— such as crime, and the rising cost of doing business —  are long-standing issues. This suggests that low traffic during the summer could persist.

Minnesota’s economy needs regulatory reform, not more regulations

The fact is,

Minnesota needs to grow and entrepreneurship is an essential part. But new businesses form and take root where they are welcome. With high and increasing taxes, as well as a burdensome regulatory system, Minnesota is not a hospitable state for businesses. 

Creating a Labor Standards Board in Minneapolis will only harm the business climate in Minneapolis, and by extension, Minnesota. Everyone concerned about the state’s economy should be alarmed.