Issue Background

Restaurants are an important part of our economy and culture. There are about 9,000 restaurants, across all 87 Minnesota counties, directly employing over 162,000 people and supporting an additional 84,000 jobs at the supplier level. The industry is made up of several types of restaurants, often described as full service, fast casual, and quick service. In the full service segment, servers, bartenders, and some other employees regularly earn tips. With the combination of their tips and wages they are often the highest paid employees in a restaurant. Minnesota is one of only seven states that do not recognize tips as income when computing the minimum wage. We are the only state in the Midwest that doesn’t recognize the Federal tip credit. In Minnesota, we have been debating this issue since 1990 without finding a solution that is fair both to workers and restaurant operators, as well as guests.

Young Workers:

Young workers make up a disproportionate share of the unemployed. They comprise 13 percent of the labor force, but make up 26 percent of the unemployed. Young workers are concentrated in sectors of the economy that are particularly sensitive to business cycle fluctuations, such as retail trade and leisure and hospitality, which fared badly during the recession. Unemployment spells early in a young person’s work life can have lasting negative effects for the future produce yet another barrier to our young people being able to find work.

Border Cities:

The proposed increase to $9.50 an hour would be the second highest state minimum wage in the country and by far the highest in our region. Among Midwestern states, Illinois has the highest minimum wage at $8.25. The minimum wage in Montana is $7.80 and in Michigan it is $7.40. All of the states that border Minnesota conform to the current federal minimum wage of $7.25. Moving the minimum wage this drastically will inevitably cause jobs and businesses to be moved to other bordering states.

Tipped Employees:

Minnesota legislators should learn from what happened in Washington State and Oregon. In those states, both similar to Minnesota in size, there have been 50,000 fewer restaurant jobs created since they enacted excessive minimum wage hikes, similar to Minnesota’s, that were tied to inflation and did not consider tips as wages. We support creating a tipped employee tier, where tipped employees who make $12/hour or more including tips would maintain the current minimum wage level. During the 2013 session this proposal received bipartisan support and a 65-65 tie vote in the House. A higher minimum wage that doesn’t recognize tips will mean fewer hours for employees, higher prices for customers and make it more difficult for restaurant operations to grow or expand -- hurting the very employees an increase is supposed to help. More properties may change their business models toward counter-service or customer ordering via iPads, and this could amplify the trend, meaning fewer good paying jobs for servers.

How can I help? Contact your legislator

MRA Floor Flier 3-20-2 (1) MRA Midwest Min Wage Rates Map 2015_KS-2 (1)