Minimum wage hike generates mixed feelings

July 1 increase is third since ordinance passed in 2017

Common Roots barista
Krista Vosper works the counter at Common Roots Cafe at 26th & Lyndale. Common Roots Cafe owner Danny Schwartzman pays all employees at least $15 an hour. Photo by Nate Gotlieb

Will Henke, general manager of The Malt Shop restaurant in Lynnhurst, said a higher minimum wage makes it harder to compete with restaurants in suburban cities, where there’s no city mandate.

Meanwhile, Chermaine Madrid, who works part time at Cheapo Records at 26th & Nicollet, said she appreciates the higher wage.

“Until I get a full-time job somewhere else, every little bit helps,” she said.

Across Southwest, workers, restaurateurs and business owners said they are feeling the impact of the city’s 2-year-old minimum-wage ordinance, which gradually phases in a $15 minimum wage.

Some businesses said the ordinance has led to higher costs, forcing them to scale back on expenses. Workers said they appreciate the extra income.

Starting July 1, the ordinance requires employers with fewer than 100 workers to pay at least $11 an hour and employers with over 100 workers to pay at least $12.25 an hour. Those rates apply both to tipped and untipped workers.

Currently, the ordinance requires small employers to pay at least $10.25 an hour and large employers to pay at least $11.25.

Henke, who employs about 30 people, said a 75-cent minimum wage increase means a roughly 3% increase in payroll, which accounts for about a third of his expenses.

Restaurateur Kim Bartmann, who owns nine Minneapolis restaurants, including six in Southwest, said her establishments are not profitable at the moment. She said she has offered her employees health insurance since 1993 and tries to pay them fairly. She said the definition of a living wage has changed over the years, but “lately it’s moot because wages have skyrocketed with the labor crisis.”

Common Roots Cafe owner Danny Schwartzman has paid all his workers $15 an hour since April 2017. He said he thinks the $15 wage will be good for workers and the community, adding that it could force a hard conversation about the role tips play in the restaurant industry.

“If you’re thinking about paying people fairly, you really have to question how tips work,” he said.

‘Hitting the wrong people’

In passing the ordinance, the City Council noted how a full-time worker making the state’s 2017 minimum wage of $9.50  while supporting a family would have a salary below the poverty line.

The council also noted about 48% of workers in Minneapolis earned less than a living wage, which at the time was $15.25 for a single person and $19.80 for a two-adult, one-child household.

“Life in the city has become increasingly unaffordable for many people,” when coupled with rising housing costs, the ordinance said.

Before the minimum-wage ordinance passed two years ago, restaurant owners were among the loudest voices calling for an exemption for tipped workers.

Susan Eder, owner of the restaurant consulting firm Cue the Accountant, said the minimum wage increase is “hitting the wrong people” in the restaurant industry. She said front-of-house restaurant staff already make two to three times more per hour, on average, than kitchen staff.

“I need the kitchen to get paid more,” Eder said. “That’s where the labor shortage is.”

Eder said she expects restaurants to institute a service charge of some sort in coming years.

Some restaurants have already instituted service charges. Bartmann added a 3% service charge before the minimum-wage ordinance passed to help cover the cost of employee health insurance. Blue Plate restaurants, which include The Lowry and Edina Grill, have an “employee wellness charge,” according to Anna Mailliard, director of marketing and communications. Dennis Curran, owner of Curran’s Family restaurant at 42nd & Nicollet, said he’s not considering adding a service charge and that his tipped employees make far above the minimum wage.

Merle Payne, co-director of the nonprofit Centro de Trabajadores Unidos en la Lucha (or Center for Workers United in Struggle), which advocated for the minimum wage increase, said it makes a huge difference in workers’ lives.

Payne said he’s also appreciated the city’s efforts to ensure that workers have a voice in the workplace. He noted a proposed ordinance three City Council members introduced on June 21 that would help protect workers from wage theft.

That proposed ordinance would require employers to provide workers with earnings statements and it would create penalties for employers who commit wage theft through activities such as withholding overtime, cheating workers out of breaks or misreporting hours.

Impact on Seattle

The Minneapolis ordinance’s passage came nearly three years after Seattle’s city council voted to raise its minimum wage to $15 an hour. Seattle’s ordinance requires employers with fewer than 500 U.S. workers to hit the $15 threshold by 2021.

A group of University of Washington researchers found that Seattle’s ordinance raised average earnings among 14,000 of the city’s lowest earners while decreasing total hours worked. In addition, they found that turnover among those low-wage workers declined and that the number of new low-wage workers in Seattle has declined.

Locally, the Federal Reserve Bank of Minneapolis is studying the effects of this city’s ordinance. It will release a report on Oct. 1 detailing the effects of the 2018 minimum wage increase.