Tuesday's increase is the first of three increases in the federal minimum. By 2009, federal law will require employers to pay their workers at least $7.25 an hour.
If Minnesota's two-tiered minimum wage remains at current level, it would fall below the federal requirement in 2009. Many unions and groups advocating on behalf of low wage workers don't want that to happen.
They're calling on state lawmakers to increase the state's minimum wage when they return for the 2008 session.
"We think it should go up to a living wage, which gives people the ability to work a full day and get a full day's pay and be able to take care of their families," says Eliot Seide, executive director of AFSCME Council 5, the state's largest public employee union. "The figure should be what gets people above the poverty level."
Minnesota's minimum wage was changed in 2005. It is broken into two parts based on the size of the employer. The minimum wage for those working for businesses with less than $625,000 in annual sales is $5.25 an hour. Those working for businesses with larger sales are required to make at least $6.15 an hour.
The Minnesota Senate passed legislation last session that would increase the state's minimum wage to $7.75 an hour for large employers and $6.75 an hour for smaller companies. The bill would also link future minimum wage increases to inflation - meaning it would increase annually. The House did not take action on the bill.
Sen. Ellen Anderson, DFL-St. Paul, says it's time to increase the minimum wage since 25 states have a higher minimum wage than Minnesota.
“It's going to get to a point to where you're going to see a $4 cup of coffee, a $10 omelet and a $12 cheeseburger.”Kevin Matzek, Hospitality Minnesota
"If you go to work and get up and work a full day, it's only fair that you should be able to support yourself and your family with the wages that you bring home," says Anderson.
A spokesman for Gov. Pawlenty says the governor is open to increasing the minimum wage above $6.55 an hour, but not willing to go above $7.25 an hour.
He also said Pawlenty would only support the increase if certain conditions were met. They include not indexing the minimum wage to inflation, providing lower wages for a 90-day training period, and exempting food servers.
At a news conference this morning, the governor said wait staff should be paid less than the new minimum wage as long as their tips make up the difference.
"Let's make sure that we acknowledge some tip credit for tipped employees -- not that they would go backwards, but they wouldn't go up as fast as everybody else," says Pawlenty. "It would be an acknowledgement, at least for our higher wage tipped employees, that they're making a lot of money beyond the minimum wage."
The "tip credit" is a major issue for Hospitality Minnesota, which lobbies on behalf of 1,500 restaurants in the state. Kevin Matzek, executive director of government affairs for the group, says 43 other states and the federal government include a tip credit in their minimum wage laws.
Matzek argues that restaurant owners will be forced to raise their menu prices if state lawmakers continue to include waiters and waitresses in future minimum wage hikes.
"It's going to get to a point to where you're going to see a $4 cup of coffee, a $10 omelet and a $12 cheeseburger," says Matzek. "Minnesotans are going to start to reassess their dining habits, which means fewer people will dine out on a regular basis."
Kris Jacobs with the JOBS Now Coalition says food servers should not be exempted from the minimum wage requirement.
She says many waiters and waitresses receive tips when they're serving diners, but also do other tasks that don't generate gratuities -- like washing dishes and filling salt shakers -- when it's not busy.
"There are only a few of the white-tablecloth institutions around the state where waiters and waitresses do well. Otherwise, waiters and waitresses are janitors, they clean up. They're responsible for so many things," says Jacobs.
Figuring out which minimum wage law applies is a bit tricky. Federal law applies if a company does business across state lines, or grosses more than $500,000 in sales a year. Companies that sell less than that, and don't operate across state lines, fall under the state law.