Major wage hike gets skeptical reception among St. Paul business leaders

A $15 an hour minimum wage is already on the books in Minneapolis. The phase-in started in January and goes fully into effect starting in 2022.

In St. Paul, mayor Melvin Carter said at his inauguration that a $15 an hour minimum wage — up from $9.65 an hour now for large employers — is one of his top priorities for his first year in office.

That debate has already started with a 33-page initial report on the idea issued by the St. Paul based Citizen's League this month. Pahou Hoffman authored the report and offered dozens of representatives of the city's Chamber of Commerce some context for Carter's promise.

"St. Paul leads, percentage wise, in the number of people of living in poverty. I believe it's 40 percent," Hoffman said.

Hoffman's report doesn't take a position on the proposal, but notes that opinion on the matter is sharply divided — from restaurant staff who told her they actually didn't want a minimum wage increase, because they'd rather see their non-tipped colleagues get the money, to a store cleaner making just $10.75 after 14 years on the job.

"She doesn't think she's going to see $15 unless there is a mandate, because she's easily replaced, she's low skilled, and the cleaning companies — it is in their best interest to keep and to hire the lowest paid workers," Hoffman said.

That promise of a higher wage drew some skepticism about the impact it would have.

Dillon Donnelly's family business is in Alexandria, but he lives in St. Paul and said he's not sure wages should be the primary way to get at the city's poverty problem.

"And particularly looking at the prime age labor group outside of the work force, so 30,000 give or take who are outside of the work force," Donnelly said. "That's a large number of people who wouldn't benefit from a minimum wage increase, whatever the number is. And what we need to do is work on the inhibitors to get people back into the workforce."

He wants to see officials address poverty more holistically than just as a wage issue.

Others raised doubts about the consequences of only local wage measures — from falling Medicaid reimbursement rates for health care services, to competing with suburban businesses with lower labor costs to franchise agreements that won't allow businesses to raise prices to reflect higher costs. Others asked if attracting higher skilled workers from outside the city with better wages would effectively drive the lowest skilled and poorest workers out of the job market altogether.

But a pair of economists cautioned that it's hard to tell what effect joining Minneapolis might have.

Experts think even a 10 percent minimum wage hike would result in about a 1 percent drop in low wage employment, said Steve Hine, the state's director of labor market information. But there are many other unintended consequences — from changing who wants to work to the potential savings of retaining experienced employees.

"The bottom line is that if anybody tells you they know that the impact is going to be such and such, they are lying to you," Hine said.

And economist Allen Bellas, with Metropolitan State University told business leaders that the debate about the minimum wage in the Twin Cities has proceeded without a key factor: a viable model of how higher wages will interact with other efforts to fight poverty, from Temporary Assistance for Needy Family benefits to Medicaid.

Bellas called for a study that could better sketch out how higher incomes could sharply reduce valuable benefits for low-income families.

"This is one potential opportunity to avoid a potential downside of an increase in the minimum wage," Bellas said, "which is well meaning, but could fling low income working people headlong toward these benefit cliffs."

Some city council members have already joined St. Paul's mayor in a call for a higher minimum wage, although there doesn't seem to be a consensus on a number. They may put together an outside group to help shape a potential ordinance yet this spring.