Minnesota lawmakers are considering raising the minimum wage from $7.25 per hour to something higher, with proposals ranging from $7.50 to $10. We believe they should exercise caution.
The minimum wage is a tricky issue. Minimum-wage jobs are often filled by people seeking entry into the workforce, or by those whose skills do not merit higher compensation. As the wage is pushed higher, employers begin looking at ways to limit the number of workers they need, whether for quantitative or qualitative reasons. When the state boosts the minimum wage, some workers benefit. But other workers are never hired at all, meaning unemployment is higher than it could be. The lowest-skilled workers are hurt the most. They don't get jobs, pay or experience.
Another problem also arises. Some employers probably need every employee they have because they are large volume businesses. When they see a minimum wage hike, they must do something else: Pass along the cost to consumers. So, the minimum wage is inflationary.
There is an argument to be made that the minimum wage really doesn't hurt anyone because many employers pay a higher prevailing wage anyway. That is, they have to pay more to attract workers to begin with. But they too must watch the minimum wage as it puts upward pressure on prevailing wages.
If Minnesota lawmakers are intent on raising the minimum wage, we hope they have the wisdom to maintain or build in ways for the smallest businesses or for certain businesses, like restaurants, to offer an alternative, lower wage. Lawmakers must reject those proposals that would raise the wage by several dollars. That would be a harsh blow to the state's business community, especially to those just getting by.