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Local business owners respond to minimum wage hike

For the first time in nearly 10 years, the Minnesota Legislature approved a hike in the state minimum wage, vaulting the state from one of the lowest minimums in the country to near the top.

Gov. Mark Dayton signed the bill into law Monday, April 14, implementing a tiered wage that would gradually increase to $8 per hour this summer, then to $9.50 per hour by 2016. The wage would be increased each year based on inflation after 2018, capping at an increase of 2.5 percent.

These increases apply to large employers grossing more than $500,000; small employers will see an increase as well, from $6.50 an hour this summer to $7.75 an hour by 2016. The $7.75 rate would apply to large employers for workers under 18, those with J1 visas and the 90-day training wage for workers ages 18 or 19.

Minnesota’s minimum wage was $6.15 per hour before this bill was signed, making it one of only four states with a wage below the federal minimum of $7.25 per hour. This wage was effectively made obsolete by the passage of the federal minimum increase in July 2009 but remained on the books.

“We went from being one of the lowest to being near the top in the nation. I don’t understand why we needed to go that high, that fast,” said Dave Sheley, owner of the Backus Corner Store Restaurant and Gun Shop. “Granted, they could have gone up a little bit prior to this and been a little bit more gradual, but now we’re on the upper side of it. I don’t really understand that.”

The bill had its proponents, opponents and proposed changes. The Minnesota Restaurant Association lobbied for a plan in which the minimum wage would remain at the federal minimum of $7.25 for tipped workers earning more than $12 an hour including tips.

Many employers of tipped workers supported this proposal, but in the end, the bill passed without the tipped worker exception.

Mark Ronnei, general manager of Grand View Lodge in Nisswa, said he’s been supportive all along of an increase in minimum wage but is very disappointed at the lack of a server exception.

“Servers are the highest paid employees including tips in the serving establishment,” he said. “If you have to pay the servers more, there’s not enough money for the back of the house. We will have to pass some of this on to our clients.”

Minnesota is one of only a handful of states that does not have a separate wage for tipped employees.

“Everyone has got to make a living. I get that. But the tipped employees, that’s a tough deal. They are going to be making way more than the rest of them if they are good,” Sheley said.

Sheley employs eight people who currently earn wages below the new minimum. He also employs around 10 high schoolers throughout the year. Most of his employees making below the 2016 minimum wage are servers. Non-tipped adult employees with Sheley’s business generally start above minimum wage.

Ryan Nelson, owner of Jr’s No. 19, a barbecue restaurant in Pine River, echoed this sentiment.

“Restaurants have notorious low-profit margins,” Nelson said. “As a server, I made two to three times minimum wage in tips.”

Dave Gravdahl, general manager of Breezy Point Resort, said the lack of a tipped employee exception will lead to an increase in prices in the restaurant business.

“Anybody who wants to stay in business is going to have to raise their prices, period,” he said. “If you want to give good service, how can you reduce the number of wait staff?”

Chuck Welte, owner of the Pine River Family Market, said his store faces additional difficulties because of its larger staff of more than 50 employees. The increase is significant in such a short period of time, he said.

“There’s a certain percentage of sales I can allocate towards payroll. So when the government raises the minimum wage, that kind of bumps the wage scale up, and that skews the whole percentage. What it really comes out to is I have a certain number of hours I have to allocate, and now I may have to cut hours. I may have to cut people in order to keep our payroll in order, to keep the doors open,” Welte said.

Having fewer employees working at one time would require increased efficiency and would potentially lead to fewer complimentary services, such as grocery carry-out, which Welte said sets small-town grocers apart from the big-box stores.

Welte said he was grateful for accommodations made for businesses employing younger workers. For many of them, the grocery store is their first job. Welte said paying them wages comparable to employees who come to his company with prior work experience would have been unfair.

Pat Netko, owner of Lake Country Crafts & Cones in Crosslake, also employs many high schoolers in the summertime. She gives her employees raises each year they come back, and the increase for employees over 18 could cause a disruption to her wage scale.

“If I had to start paying 16- and 17-year-olds $9.50 to begin with, the cost of an ice cream cone would skyrocket,” she said. “I look at it as, it’s going to be a real problem for us small businesses.”

Welte said the new minimum wage may force him to hire fewer young students, and more experienced employees. Adults and experienced employees working for him already start at more than minimum wage, but he knows they have work experience, which increases their worth.

Lisa Kaneski, co-owner of the Pequot Lakes, Nisswa and Pine River Dairy Queens, also hires many high school students. She said about 70 percent of her staff already make more than $8 per hour, but an increased minimum wage could lead her to raise their pay for sake of fairness.

“I’m sure the filter down effect will have to be that everyone will get an increase, because when you have your new workers making almost as much as your core staff, then it’s going to create a situation where you have to give everybody a fairly decent hike,” Kaneski said.

Dairy Queen prices are determined by company guidelines, so local locations will have to determine potential staffing changes after receiving guidelines for food prices.

Welte and Sheley both said an increase in prices might be necessary, though the minimum wage increase might not be the only culprit.

“The food prices (in the restaurant) will have to go up a little bit more. They are going up anyways because of a lot of different problems that they (suppliers) are having with produce. It’s going to definitely reflect in that a little bit,” Sheley said.

According to story by Don Davis of Forum News Service, the law will increase wages to more than 357,000 workers in Minnesota, of which 45 percent have some college education, 57 percent are women and 62,850 are parents.

A January 2014 report by the Minnesota Department of Labor & Industry said that as of 2013, Minnesota’s minimum wage was 30 percent below its 1974 level when adjusted for inflation, and the U.S. minimum was 25 percent below.

At the time of the report, about 155,000 of Minnesota’s hourly workers lived at or below the poverty line.