Staff report recommends a minimum wage of $12.49 to $15

A draft municipal minimum wage ordinance is expected to reach the City Council in June

City staff recommend setting a Minneapolis minimum wage at between $12.49 and $15 an hour with no exception for tipped workers in a report prepared for the Thursday morning meeting of the City Council’s Committee of the Whole.

Staff also recommend a phase-in of higher wages over at least four years — or longer for small businesses — and a lower training wage for youth workers in the report, which sets the stage for the draft minimum wage ordinance that is expected to reach the City Council in June. Council members have said a vote on the ordinance could come by late spring or early summer.

Minneapolis is steadily moving toward setting a minimum wage significantly higher than what is required by the state — currently $9.50 an hour for large employers and $7.75 for small businesses. Mayor Betsy Hodges, once an opponent of the go-it-alone approach, changed her mind over the winter, and now a City Council majority appears to support a higher minimum wage with no carveout for tipped employees.

That carveout is alternately known as a tip credit or a tip penalty, and it would allow employers to pay tipped workers a lower base rate, as long as their hourly wages plus tips totaled at least the minimum wage. If not, the employer would have to make up the difference.

Two campaigns have pressured policymakers to include the carveout, warning that the alternative is lost jobs and higher menu prices. They include Pathway to $15, representing the local restaurant industry, and Service Industry Staff for Change, made up of restaurant servers and bartenders.

Pathway to $15 released a statement Tuesday evening that dismissed findings in the staff report as “predetermined.” The statement quoted Service Industry Staff for Change founder Sarah Norton, who said the mayor and members of the City Council were listening to special interest groups instead of workers. She pledged to continue fighting for a carveout.

“We refuse to be the collateral damage in this effort,” Norton said.

The staff recommendation against a carveout notes that the policy would align the city with the rest of Minnesota, one of eight states without a tip credit since the legislature voted to eliminate the provision in the 1980s. The report notes that most Minneapolis restaurants would also benefit from an extended phase-in of higher wages, since the staff recommendation is that small businesses get at least one or two years longer than large businesses to implement the new minimum wage.

Employers would be allowed to pay youth workers less for their first few months on the job under the policy proposed by city staff. The report suggests a training wage set at 85 percent of the new minimum wage during a 90-day training period.

The report notes feedback from business owners who said they would hire fewer teens after a minimum wage hike. The head of AchieveMpls also warned that a higher minimum wage would make it harder to place interns through the city’s STEP-UP Achieve program, which currently requires a $10 an hour wage.

Staff recommend the citywide minimum wage “apply to anyone who works in Minneapolis for any amount of time,” but report adds that the city’s ability to apply the ordinance to employers based outside of city limits is a legal question that hasn’t yet been answered.

The report was prepared after several months of public engagement, including 16 listening session attended by about 450 people, 1,759 survey responses and 115 comments submitted via email. The report also considers the input of the Minneapolis Workplace Advisory Committee, whose appointed members advise city leaders on workplace policy, and a growing body of research on municipal minimum wage ordinances.

That body of research includes a study of the effects of raising the local minimum wage to either $12 or $15 that was delivered to the City Council last year by researchers at the Roy Wilkins Center at the University of Minnesota. That study predicted black and Latino workers, in particular, would benefit from a higher minimum wage, because they are overrepresented in low-wage jobs. The study also predicted a minimal loss of jobs after higher wages take effect.

The staff recommendation notes that the minimum wage is just one tool Minneapolis can use to reduce the city’s economic and racial inequities. In general, the staff report adds, the city should continue to focus on other issues that contribute to disparities, including access to affordable housing and transportation, education, training and jobs.