State minimum wage to increase Aug. 1

The state minimum wage will increase Friday to $8.00 an hour for large Minnesota employers. That's the first of three increases scheduled to roll out by August 2016.

It's obviously a boost for low-wage workers. But others, like employers and those earning just above the minimum-wage threshold, might be wondering what's in it for them.

• •April 14: Dayton signs minimum wage increase

• •April 18: Minimum wage hike stirs worry among Minnesota's not-so-small businesses

• Ann Markusen of the Humphrey School for Public Affairs compiled a report on living wage jobs for a Minnesota House select committee last session. She spoke with MPR's Tom Crann. Here's an edited transcript of their conversation.

  Tom Crann: Based on your work, I think it's fair to say that you are a proponent of a raising the minimum wage?

  Ann Markusen: I believe that most economists are proponents of raising the minimum wage at this time.

  Crann: So first logistically, what happens on August 1?

  Markusen: Every employer who makes more than $500,000 in sales a year will raise the wages of their workers that are at minimum wage, or below $8 an hour, to $8 an hour.

  Crann: And this is the first of a multi-step process to get to what, by when?

  Markusen: We'll go up to $9 an hour next August 2015, and to $9.50 hour in August 2016. And beginning in 2018, it will be indexed to the inflation rate.

  Crann: What about people who are earning just above? Let's say someone's earning $8.05 an hour - no raise for them, then, automatically?

  Markusen: There's no automatic raise, but of course over the next few years, when it goes up to $9.50, they will be phased in. Also, for some workers above that, employers will feel, 'I'm raising the wages of my lower workers and these people I value, so I'm going to raise their wages some.'

  Crann: So you do see that — the rising tide I would call it — where, if we're going to raise people to minimum wage, why not give everyone in the company a raise of a quarter or something. Do you ever see that happen?

  Markusen: Yes, we do see that happen. And keep in mind that we haven't had an increase since 2009. I think a lot of employers, especially now that the economy is really recovering, will feel that they can handle that.

  Crann: What evidence do you have on the effect on employers here? People said this would hurt businesses, it will hurt hiring. What do you see?

  Markusen: Economists have done a lot of studies on actual minimum wage increases and their effect on employment. These studies are mainly border studies. We have, over 20 years, many cases where one state - like Minnesota - raised its minimum wage when Wisconsin or Iowa or the Dakotas did not, or vice versa. Economists take the counties on either side of the border and look for employment effects. There are probably three or four dozen of these studies, and the findings are very minimal one way or the other. And the statistically best studies show no effect.

  Crann: Do you see a tipping point here? We're going to get to $9.50 an hour in 2016. Is there a point where that does make a difference — cuts into profits, makes employers think about hiring?

  Markusen: It's hard to know because it depends on what the economy does. Right now, the economy is looking very good. So I think, there probably will not be. And remember, there are only 60,000 people at the minimum wage now. Even though more people will be affected, it's still a small percentage of the total workforce.

  The other thing that's really important to think about is the macroeconomic effect. You're putting money into the pockets of the people that are most apt to spend it right away, to spend it locally, and to spend all of it. So, that's going to have a positive effect that we don't even think about in terms of microeconomics of business. But it's part of the reason I think we do not see a decline in employment following minimum wage increases.

  And plus, we'll have many fewer people that will be eligible for food stamps, subsidized health care or housing, and so on. So, it's going to have a very positive effect on the state and we can use that money for something else or to help people who really need it.