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Other view: Tip credit necessary, but ‘indexing’ is not

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opinion Duluth,Minnesota 55802
Duluth News Tribune
Other view: Tip credit necessary, but ‘indexing’ is not
Duluth Minnesota 424 W. First St. 55802

Consider this comment from Senate Majority Leader Tom Bakk, DFL-Cook, about whether future increases in the state’s minimum wage should be indexed to inflation: “(It’s) not going to happen. There won’t be a bill. If that’s the big hang-up, it’s too bad because people could benefit from the higher wage.”


Now, consider this comment from House Speaker Paul Thissen: “The bottom line, to me, if the Senate wants to kill the bill, they should just tell Minnesotans directly and stop playing games with it.”

Granted, legislators often disagree. But when the two most powerful DFLers in the Legislature disagree so stridently and so publicly, there clearly is a problem.

At the moment, Republicans are pretty much a non-factor in this debate. The House already has approved an increase to $9.50 per hour, and the Senate, according to Bakk, has the votes to hit that same mark. So, barring an unforgivable impasse among DFL leadership, an increase in the minimum wage appears certain.

But a major sticking point is whether the minimum wage would go up automatically to keep up with inflation. Another is whether the bill will include a so called “tip credit,” which allows employers to pay below-minimum wages to employees who routinely receive tips.

The tip-credit issue seems fairly cut-and-dried (although it’s getting less attention than the inflation indexing). Minnesota is an outlier, one of just seven states that have no tip credit. If a $9.50 minimum wage becomes law without a tip credit, then a Minnesota restaurant owner could have labor costs that are quadruple those in Wisconsin, where tipped employees can have an hourly wage of just $2.33.

There are 22 states where tipped employees, due to the tip credit, can receive hourly wages of less than $3 per hour. Some go as low as $2.13.

Minnesota doesn’t need to go that low, but as the minimum wage gets closer to a livable wage, it’s reasonable to give restaurant owners some relief. Even with a tip credit wage of $7.50 per hour (a “credit” of $2 off the proposed $9.50 minimum wage), Minnesota tipped workers still would have a higher base wage than workers in all of the 40-plus states that have a tip credit.

Unfortunately, neither the House nor Senate versions of the minimum wage bill include a tip credit of any kind. That can change as negotiations continue.

Regarding the inflation adjustor, it’s tempting to take Thissen’s side. So far, 10 states have approved inflation-adjusted minimum wages, including right-leaning states such as Arizona, Colorado and Montana. Another 10 have similar bills working their way through their legislative process. In New Jersey, voters will have the final say on indexing in a referendum this fall, and polls show support for this measure at nearly 80 percent.

But by taking the wage from $6.15 to $9.50, Minnesota would preclude the need for automatic wage increases for several years. If inflation does erode a dollar’s buying power during the next five or 10 years — and if the free market doesn’t force employers to raise wages accordingly — then it will be up to future Legislatures to recognize that fact and raise the minimum wage.

Just as we generally oppose governing through amendments to the state Constitution, we also dislike the notion of passing laws that assume future legislators won’t do their jobs.