DFLers want to raise minimum wage 30 percent to $9.50

Tomassoni (left) and Hortman (right) want to raise the state minimum wage above the federal level.
Tomassoni (left) and Hortman (right) want to raise the state minimum wage above the federal level.

During his State of the Union speech last night, President Obama called for the federal minimum wage to be raised to $9 an hour. Two DFL lawmakers want to do him one better.

SEE ALSO: Tom Emmer goes after food server wages

A bill introduced in the House by Rep. Melissa Hortman, D-Brooklyn Park, and in the Senate by Sen. David Tomassoni, D-Chisholm, would raise Minnesota's minimum wage all the way up to $9.50 an hour, a more than 30 percent increase over the current federal rate of $7.25.

Since 2005, Minnesota's minimum wage has been $6.15 for large employers and $5.25 for small employers. But in most instances, the federal rate prevails, as explained in this Department of Labor FAQ:

What is the federal minimum wage?

Under the Fair Labor Standards Act (FLSA), the federal minimum wage for covered nonexempt employees is $7.25 per hour effective July 24, 2009. Many states also have minimum wage laws. Where an employee is subject to both the state and federal minimum wage laws, the employee is entitled to the higher minimum wage rate.

Various minimum wage exceptions apply under specific circumstances to workers with disabilities, full-time students, youth under age 20 in their first 90 consecutive calendar days of employment, tipped employees and student-learners.

More information about the Hortman/Tomassoni bill comes via Politics in Minnesota:

In addition to raising the minimum wage, the bill would fund childcare assistance programs and provide per-child tax credits for families.

"Poor people are poor because they don't have a lot of money, and the sad part is a lot of poor people are working people," Hortman, a DFL House member from Brooklyn Park, said while surrounded by clergy members and union representatives who support the bill. Hortman said the bill got a "big shot in the arm" from President Barack Obama, who said in his State of the Union address on Tuesday that he would like to see the federal minimum wage raised to $9 an hour.

For Tomassoni, giving more money to workers is good for the economy. "This is about putting some buying power into some people's pocket," the senator from Chisholm said.

But restaurant owners, in particular, are opposed to increasing the minimum wage, as explained by the Employment Policies Institute's Michael Saltsman:

Minnesota is one of seven states that does not permit employers to count the tips earned by restaurant employees as income. As a consequence, the base wage for tipped employees is already 240 percent above the federal level. The DFL proposal would widen this gap, and link it to inflation, causing it to grow most years thereafter...

Local businesses in Minnesota can help provide context -- businesses like the River Oasis Cafe, a diner in Stillwater. Purchased five years ago by Craig Beemer, the cafe has 17 employees and annual sales just over the threshold the state uses to distinguish a "small" from a "large" business.

Beemer doesn't feel like a large business. Even on busy weekend mornings, he has just seven people on the floor -- four servers, two cooks and one dishwasher. Last year, as the owner of the business, he estimates his income was only about 20 percent higher than the top-earning employee on his wait staff.

Running the numbers on the proposed increase in the minimum wage, Beemer estimates an increase in labor costs of more than $20,000. Labor costs, however, already eat up 31 percent of his sales revenue, and food costs consume another 34 percent. After paying rent and other expenses, Beemer's profit margin -- the amount the business keeps from each sales dollar -- is 2.8 percent.

If the minimum wage were increased from $7.25 to $9.38 per hour, Beemer said, "I don't think it's possible to operate my business profitably without making significant changes to our business model." With his prices already raised to the upper limit of what he believes his customers will pay, Beemer said, changing his business to a "fast casual" model, where customers place their order at the counter, may be the only way to operate profitably.

The servers who used to wait on customers -- the servers whom the DFL wants to help with this hike -- would unfortunately be out of work.

Here's a possible compromise: Raise the minimum wage to at least the federal level for untipped workers, but leave the minimum wage for tipped workers unchanged.

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