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Debate touches on pros and cons of raising state minimum wage

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A Walmart bakery worker puts fresh rolls in display bins on Sept. 28, 2012. The federal minimum wage of $7.25 an hour applies to people who work for large companies or companies that engage in interstate commerce. In Minnesota, the minimum wage for the smallest businesses is $5.25. Bills being considered at the Legislature would raise the minimum wage and include a mechanism that would keep the wage rising with inflation each year.
ROBYN BECK/AFP/Getty Images

Some of the first bills introduced at the Minnesota Legislature this year would raise the state's minimum wage, which has not increased since 2005.

The federal standard of $7.25 an hour applies to people who work for large companies or companies that engage in interstate commerce. The state minimum wage for the smallest businesses is $5.25 an hour.

The bills being considered would raise the minimum wage and include a mechanism that would keep the wage rising with inflation each year.

Two experts joined a discussion with Cathy Wurzer on "Morning Edition" about the pros and cons of raising the state minimum wage: Kris Jacobs, the executive director of the JOBS NOW Coalition, who supports the idea; and Mike Hickey, the Minnesota state director of the National Federation of Independent Business. He opposes raising the minimum wage.

Cathy Wurzer: Kris, why do we need to raise the minimum wage?

Kris Jacobs: It's been a long time since the wage has been raised. Most of the people who work for the minimum wage spend their money immediately.

Wurzer: In terms of rent or food or that kind of thing?

Jacobs: Absolutely. And that additional raise is a stimulant to the economy because minimum-wage workers spend their money on the ground, in their local communities. But it's a matter of basic human decency. People who work for a living should be able to meet their very basic needs. And we think it's time.

Wurzer: I want to bring Mike in here, but first I want to ask you, how far do you want to see the minimum wage go up?

Jacobs: Well, we have a bill that we're supporting, the Family Economic Security Act, which brings the minimum wage up to $9.50 an hour over two years. And I dare say we'll probably see others because the time is passed.

Wurzer: Senate File 3 raises the minimum wage. Mike Hickey, when you look at the language, just philosophically, it hasn't been raised since 2005 and some of the businesses you represent have minimum-wage workers. Why not hike the minimum wage?

Mike Hickey: Well, obviously this issue comes up every once in a while and it's definitely in play this year. The vast majority of people earning a minimum wage are not a head of a household. The vast majority, it's a second, third or fourth income in a household. But you raise this wage too high and part-time jobs are going to disappear for people. That's going to hurt families who use a second, third or a fourth income.

Wurzer: Why would those jobs go away? Employers can't afford to pay?

Hickey: There's only so much an employer is going to pay to hire a young person or a part-time person. You start getting it up in the $8 or $9 per hour, a lot of employers are going to say that this is not worth the time and effort to train this person for that amount of money. These jobs are going to disappear. It's mostly for younger people, and it's a way to subsidize their income and a way to subsidize their family's income.

Wurzer: Kris, do you agree with that?

Jacobs: Most of the people who earn the minimum wage are women. And what I would disagree with here is that many people would like to work full time, and full-time minimum wage workers earn $15,000 a year. Senate File 3 raises the minimum wage by a quarter, which means $10 a week. I don't think $10 a week is too much. They need their income, and income inequality is huge problem in America. And one way we can get at it is to make sure wages go up the way they should.

Wurzer: What about Mike's contention that if employers have to pay the higher wage then they're just not going to hire people?

Jacobs: Well, maybe you don't have a viable business if you can't pay $5.25 if you're a small employer, if you can't pay $6.15, if you can't pay $7.25. We would question that argument seriously.

Wurzer: Mike Hickey?

Hickey: Well, there are consequences to raising the wage dramatically, and businesses are going to react any way they have to. Jobs are going to disappear. A lot of employers are not going to pay that to some young person who they have to totally train, who may come in with almost no work experience whatsoever. For a lot of these people, it's their first job.

Wurzer: What about the escalator part of this. In terms of indexing to...

Jacobs: We don't believe in locking in a loss.

Hickey: That's the worst part of this bill. Because what it does is that it puts the whole thing on autopilot. We're tying it to the CPI, the Consumer Price Index, and the Legislature needs to visit this issue every once in a while. They're going to do it this year. Put on autopilot, our biggest concern is if we go into a period of high inflation and this wage is tied to an escalator, who knows how high it could go? Once again, it could get to a point where it gets so high that employers are not going to employ these people.

Wurzer: Kris is smiling and she's not buying any of this, Mike Hickey.

Jacobs: Well, employers already have a gift in the form of a $3 subsidy in not keeping pace with the inflationary value of the minimum wage. We think this has gone on for a long time. It's time to restore the floor on the minimum wage. We need minimum-wage workers to earn as much as they can.

Wurzer: Many economists believe the effects are kind of negligible because they say so few workers over the age of 25 earn minimum wage. Less than 2 percent, according to the Bureau of Labor Statistics.

Jacobs: Well, half a million jobs pay less than $10 an hour. A million jobs pay less than what JOBS NOW calls a "family supporting wage" of $14 an hour. So Mr. Hickey ought to be happy to have an escalator on such a low amount. For working people, if we lock in an escalator at this low rate, we're locking in that $3 loss, and we hardly think that's fair.

Wurzer: Both of you have been around the Capitol for a very long time. We know that there's going to be a lot of different bills in the hopper here, not only Senate File 3 but others that are coming down the pike. Do you feel it's a foregone conclusion that they're going to raise the minimum wage here in Minnesota this session?

Hickey: I think it probably is with the change of power here. I think that our concern is going to pare this bill back. Take the escalator out. The escalator is really a bad precedent.

Wurzer: But what are you willing to accept in terms of some kind of floor? Some kind of an increase?

Hickey: We're going to have to see. The fact that we're keeping the lower wage at $5.25 is really appreciated, but at the same time the escalator is concerning.

Wurzer: Kris?

Jacobs: Like I said, we're very disappointed. If Minnesota employers want people to value those jobs, those jobs need to be more valuable.

Wurzer: Mike, when you look at Minnesota, where do we stack up when it comes to other states in the Midwest when it comes to minimum wage?

Hickey: Our small business wage is pretty low. I think that's been a great benefit to the small employers who meet that criteria of $625,000 and can take advantage of that. That's helped them. But our other wage, most employers are paying $7.25, under Senate File 3 they're going to $7.50 and the other bills put it way higher. I mean, we feel we should stay in sync with the federal because they revisit this issue every once in a while, too.

Jacobs: Since the minimum wage became a political football, here we are. And guess who gets hurt? Minimum-wage workers. The bargaining power of the individual worker is very, very low. Employers hold the cards. Employers need to do the right thing.

Wurzer: Mike Hickey?

Hickey: Well, Minnesota is paying the federal wage. Very few people qualify for the small business lower wage. So we're paying the federal wage. How many states are above the federal wage?

Jacobs: 19.

Hickey: OK. Well, the vast majority are not. And that's where we are. We're paying the federal wage.

Jacobs: Still low.

Wurzer: I can see this is going to be obviously a debate at the Capitol, not only here but at the Capitol as well.

• Follow Cathy Wurzer on Twitter: http://www.twitter.com/cathywurzer