Minnesota minimum wages rise Jan. 1. Are employers ready?

Fresh minimum wage hikes and new sick pay laws will boost the paychecks of some Twin Cities workers starting Monday, but some workplace experts worry not all businesses are prepared for the changes.

In Minneapolis and St. Paul, the minimum hourly wage will jump to $15.57 an hour for businesses with more than 100 employees. That's an increase of 38 cents an hour. In Minneapolis, smaller businesses must start paying the higher wage in July. In St. Paul, the minimum wage for smaller businesses is $13 right now and will be $14 starting in July.

Minimum-wage rates across the state will also jump Jan. 1 to $10.85 an hour for employers with revenue over $500,000 and $8.85 for smaller businesses.

Advocates for those living in poverty said the upticks are a much-needed boon to low-income workers struggling to keep up with skyrocketing prices on food, gas and rent. At the same time, employers expressed concern about wage pressures, saying they've already had to increase pay because of historically low unemployment rates (now 3.1%), widespread labor shortages and the spillover "great resignation" effects of the pandemic.

Bryce Quinn, co-owner of the Cafe Latte and Bread & Chocolate bakeries in St. Paul, said he starts about five new workers a month at around $15 an hour but quickly advances them so all exceed minimum wage after just a few months on the job.

Quinn said he must pay more to recruit talent whom big retailers such as Walmart and other suburban employers are also wooing.

"It's all part of making sure you can attract people. You want to be able to compete," Quinn said. Paying more also curbs turnover, which at one time "was an issue."

Gideon Ondieki, research analyst at the Minnesota Department of Labor and Industry (MDLI), suggested in a recent report that Quinn is far from alone in issuing fatter paychecks.

"Worker shortages and increased job mobility following the [post-COVID] re-opening of businesses, combined with high inflation [will] affect wages across many sectors of the economy in Minnesota," the report read.

Whatever the reason, MDLI Commissioner Nicole Blissenbach recently said "increasing minimum-wage rates gives the lowest-wage workers in Minnesota more earning power as they work hard to support themselves and their families."

A national issue

Many sectors in the state already pay more than the state's minimum wage, although the largest deviations are in concentrated fields, according to the Minnesota Department of Employment and Economic Development.

Merle Payne, co-director of the labor rights group Centro De Trabajadores Unidos En La Lucha (CTUL), said some of the lowest-wage workers in construction, janitorial and service trades often struggle with employers who resist paying the minimum wage. The state of Minnesota is increasingly cracking down on labor rights violators, Blissenbach and Attorney General Keith Ellison said.

Yet, law-abiding employers in Minnesota have work to do to keep up with peer states.

The progressive Economic Policy Institute (EPI) reported that even with Monday's coming wage hikes, Minnesota's new $10.85 hourly minimum wage will be less than the requirement in Illinois ($13) and Nevada ($11.25 ). Minnesota will remain above North Dakota ($10.80), Michigan ($10.10) and far above Wisconsin and Iowa ($7.25).

According to the U.S. Department of Labor, 1.1 million workers earned wages at or below the federal minimum rate of $7.25 an hour in 2020.

The EPI noted many local governments have been inching wages higher in recent years.

"In the absence of federal action, states and localities continue to take the lead in advancing fairer wage floors via legislation, ballot measures and automatic inflation adjustments," said EPI researcher Sebastian Martinez Hickey in a recent report.

Some 38 cities and counties nationwide will hoist their minimum wages on Jan. 1 to levels above state minimum-wage floors. Separately, 22 states — including Minnesota — are boosting minimum wages New Year's Day to adjust for inflation and other measures.

That means 9.9 million U.S. workers will receive an additional $6.95 billion in wages in 2024.

Hickey also found more than 2.5 million minimum-wage earners are parents, and 5.6 million children come from minimum-wage households.

Steven Dyme, co-founder and chief executive of Chicago-based Flowers for Dreams, opened a Minneapolis and Roseville studio last year and boosted wages at his Michigan, Wisconsin and Illinois studios from $15 to $16, so his 30 lowest-paid workers could gain more economic independence.

Most of Dyme's 160 workers make more than $20 an hour.

"Raising the minimum wage isn't just pro-worker: It's pro-family, pro-business," Dyme said. "Workers who can comfortably make ends meet will do right by your product, focus on quality and provide the same care to your customers that you provide to them."

Sick leave changes

In addition to new minimum wage mandates, other laws taking effect Monday in Minnesota could also change some workers' circumstances.

One will require employers like Dyme to provide workers with one hour of sick leave for every 30 hours worked. Another means employers can no longer ask job candidates about their wage histories. Two other laws create new ergonomic or safety standards for warehouse, meatpacking and healthcare workers.

Many employers aren't quite prepared for the law changes, said Billy Doherty, president of Doherty Staffing Solutions and vice president of Dahl Consulting.

"Not enough organizations have really put the time in right now to talk about this top to bottom, to ensure that at the first of the year, they've got everything in place," Doherty said. "A lot will be learned in that first month here in January to get an understanding of what this looks like."

Figuring out differences between traditional paid time off and the accumulative sick leave policy will require human resources staffs to pay close attention to hourly schedules and automated payroll systems, Doherty said.

Many smaller employers use a standardized point system to track attendance and job duties for new, entry-level workers.

"Now that's very much being called into question with the allowable [sick] absences," Doherty said.

He added managers need training so they "understand that points cannot and should not be assessed for allowable absences.

"Employers must make sure that all hiring managers are aware of that and anticipate the need for leaves that are now legally mandated to fall under sick and safe," Doherty said.