Minnesota will vault past Illinois, Michigan and South Dakota this week to set the highest minimum wage in the Midwest at $9 an hour, among the most generous minimums in the country.
The dollar-per-hour bump taking effect Saturday for approximately 288,000 of Minnesota's lowest-paid workers is the second of a three-stage increase adopted in 2014, when the state had one of the lowest minimum wages in the region. Next August, the wage will rise again to $9.50, and it will rise automatically with inflation in following years.
For now, this step gives Minnesota the highest minimum wage of any state away from the East or West Coast. The next closest in the region are South Dakota's $8.50, Illinois' $8.25 and Michigan's $8.15.
Gov. Mark Dayton, a Democrat who signed the new wage law last year, said Monday the higher wage is about "allowing people to earn a better living through their work. We're not talking about handouts here. We're talking about rewarding people who work with a better income, which makes them better citizens."
Someone working full time at the minimum wage could earn $2,000 more per year. But Dayton said such a worker's overall income would still remain too close to the federal poverty line.
"People aren't flying out to New York to spend this money. They're spending it in their local economy," Dayton said in an interview with The Associated Press. "That's what drives our economy forward. It's not trickle-down economics. It's consumer spending."
Dan McElroy, who leads the restaurant and lodging trade group Hospitality Minnesota, said the series of steep minimum wage increases has forced businesses to adjust to big spikes in labor costs.
To compensate, he said, some restaurants have introduced technology that allows servers to handle more tables or lets customers order at their tables via tablets. Others have shortened service hours, he said. One border-town cafe owner gained widespread attention for tacking a 35-cent minimum wage fee onto customer tabs.
"It has had challenges, and they're frustrating, but they're not dire," McElroy said. "We will know more when we see how many fewer jobs we have per establishment. But those things take time to happen."
Small Minnesota employers — those with annual gross revenue of less than $500,000 — still will be permitted to pay workers less, with their minimum wage matching the federal minimum. Businesses can also pay trainees at the lower rate for 90 days, and teenagers can be paid less, too.
Washington and Oregon currently have the nation's highest minimum wages at $9.47 and $9.25 per hour, with five others at or just above $9. Minimums in California and Massachusetts will rise to $10 per hour in January.
Minnesota's latest increase leaves a wider gap between its wage floor and that of neighboring Wisconsin, a peer state in many regards.
Wisconsin state Sen. Jennifer Shilling, a Democrat whose district is just across the Mississippi River from Minnesota, bemoaned the lack of interest from Gov. Scott Walker and Republicans in Madison in raising that state's $7.25-per-hour minimum wage.
"While states like Minnesota are raising family wages and growing their middle class, Republicans in Wisconsin have taken our state in the opposite direction," Shilling said in an email. "Despite the national economic recovery, working families in Wisconsin continue to struggle as a result of declining wages, a shrinking middle class and massive cuts to schools and local communities."
When Walker announced his presidential campaign two weeks ago, he ridiculed Democrats pushing for minimum-wage increases.
"The left claims they're for American workers, and they've got lame ideas, things like minimum wage," Walker told Fox News in an interview. "We need to talk about how we get people skills and qualifications they need to get jobs that go beyond minimum wage."
Associated Press writer Scott Bauer contributed to this report.