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Minimum wage increase coming

If you thought gas prices were outrageous, a $12 cheeseburger will really get your blood boiling.

An increase in the federal minimum wage Thursday may be much ado about nothing. Or it could cause a cascade of rising food and beverage prices.

And it could be the beginning of yet another groundswell to raise Minnesota's minimum wage, which has now fallen behind the federal rate for the first time.

A similar push for higher state minimum wages by the Legislature last spring ended with Gov. Tim Pawlenty's veto shortly after the bill passed.

"We've always started employees at $6.50 an hour so that will have to go up," said Burger King manager Karen Holtz. "But we'd stay at that. Normally we'd jump it up but the government did that for us."

Burger King, like most local employers, has traditionally paid above the minimum wage for starting workers, so how much the new increase in federal wages will affect local businesses remains unclear for several reasons.

One is that the median wage in the 26-county region of northwest Minnesota, including Hubbard County, is $13.76. That's an indication that most employers pay higher wages than minimum.

Another reason is that the two separate wage laws now make it tricky for employers to decide which applies.

The federal minimum wage went from $5.85 to $6.55 per hour Thursday. This year's increase is part of a three-year plan to raise wages in the country.

By this time next year, the federal hourly wage will be $7.25 per hour.

"Our minimum wage is not changing," said Jenny O'Brien, spokesperson for the state Department of Labor & Industry (DOLI). "It is now below the federal minimum wage."

But O'Brien admitted there was some uncertainty about which law would apply to which employer.

In 2005 Minnesota implemented a two-tiered wage structure for large and small employers. Large employers, those with $625,000 or more in annual gross sales or business done, must pay employees at least $6.15 a year.

Small employers, making less than the $625,000 in annual gross sales or business done, may pay workers $5.25 a year.

Additionally in Minnesota, training wages of $4.90 an hour may be paid to new employees under age 20 during their first 90 days of employment.

These three categories of wages apply to full-time or part-time employees.

So do Minnesota employers now have to give raises to all employees?

"It depends," said O'Brien.

n??If the business produces or handles goods for interstate commerce it must adhere to the higher federal rate of $6.55.

n If the business has an annual dollar volume of $500,000 or more it must pay the federal wage.

n??Hospitals, nursing homes, private and public schools and state and local government agencies must pay the federal wage.

n??Small employers with an annual sales volume of less than $500,000 and not engaged in interstate commerce may continue to pay the $5.25 hourly rate.

n??Employers may continue to pay the training wage for minors for their first 90 days of work.

"I don't agree that they should raise the state wage (to keep pace with the federal rate)," Holtz said. "It's fine and dandy that they do raise these rates but how do you pay for these things as a business?

"I guarantee you next week I'll get a price change," she said. "The more they bump these up, the more grocery stores and me, we have to raise prices just to pay your wages."

Holtz said her business is so price sensitive that even a rise in gas prices, to $3.99 a gallon, caused her customers to shy away.

And she said that occasionally employees quit for higher paying jobs, but she doesn't hear much complaining that they can't make ends meet on their current salaries.

"I employ a lot of young mothers and they don't want to make a lot more because if they do it cuts off their daycare benefits," she said. "It's a Catch-22 for them."

DOLI estimated in a 2005 study that 83,000 Minnesota workers earned $6.15 an hour or less at their main job between August and December 2005. That was 3.1 percent of the labor force.

Politicians have debated whether the current minimum wages in the state are "living wages."

Unions and groups advocating for low-income workers argued it wasn't during the 2008 legislative session. They pointed to the increased need for food stamps, fuel assistance and other state and federal subsidies as evidence that workers can't live adequately working at minimum wage jobs.

Meanwhile, Pawlenty has indicated he will veto any future legislation that doesn't contain a tip credit.

Most other states, such as North Dakota, pay tipped employees a significantly lower wage, usually $2 per hour less than the minimum wage, because the worker earns tips to make up the difference.

Hospitality Minnesota, which lobbies on behalf of the state's 1,500 restaurants, supported Pawlenty's veto, indicating that if food servers are included in future minimum wage hikes, restaurant owners will be forced to raise their prices. They threatened that a $12 cheeseburger would be the result.

Michelle Roach and Kim Mutch, two longtime servers at the Royal Bar in downtown Park Rapids, say they feel lucky their employer pays them a higher wage than the state or federal minimum, but both admit they struggle to get by, even making tips.

"I'm a single mother," Roach said. "Of course it's hard."

And Mutch pointed out that during the winter when the tourists have left the area, the tips leave with them.

The StarTribune editorialized in March that "a state's minimum wage is more about the size of workers' paychecks. It's also a statement of how deeply a state values work, no matter how lowly the job.

"We think most Minnesotans hold that all work is noble. The state's minimum wage needs to be higher to reflect that."