146: Minimum Wage Madness in Minneapolis

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SmallBiz Brainiac

Miscellaneous


The city of Minneapolis has bought into the voodoo economic theory that they can regulate the labor market and bend it to their will. Even if you don’t have employees in Minneapolis, you need to stay on top of all the local HR laws because they are a sign of things to come. Especially if you live in a city that is governed by Democrats. The city of Minneapolis has bought into the voodoo economic theory that they can regulate the labor market and bend it to their will. They’ve jumped on the municipality minimum wage bandwagon and passed an ordinance creating a city minimum wage of $10.00 effective January 1, 2018 and increasing each year until it reaches $15.00 in 2024. The City Council and Mayor apparently unhappy with the federal and state governments lack of action to protect the city’s citizens health, safety and general welfare, have taken matters into their own dirty little hands. You see, the labor market, and every other segment of the economy, are far too complex for any one politician or gaggle of politicians to understand, let alone control. They can manipulate the markets, thereby making them more expensive and complex. They can even kill certain markets sending them into the black market. But the only certain outcome of their meddling is damaging unintended consequences. Seattle’s Minimum Wage: Seattle’s minimum wage took effect April 1, 2015. The minimum gradually increases to $15 per hour as early as this year, and as late as 2021, based on the size of the business. After reaching $15 per hour, it will increase every January 1st thereafter, based on the Consumer Price Index for the area. So how’s it working so far for low-wage workers? The answer, not so well. According to The Seattle Minimum Wage Study Team at the University of Washington, employers have cut their payroll, postponed hiring and reduced hours or terminated employees. Overall, the study says the average low-wage worker lost $125 month because of the increase in the minimum wage. And those are the results of just the first 9 months. Long before the full-effect will be felt. The reports says: “… our best estimates find that the Seattle Minimum Wage Ordinance appears to have lowered employment rates of low-wage workers. This negative unintended consequence (which are predicted by some of the existing economic literature) is concerning and needs to be followed closely in future years, because the long-run effects are likely to be greater as businesses and workers have more time to adapt to the ordinance.” But, maybe economics work differently in Minneapolis. After all, I’m sure, being the rhode scholars they aren’t, the City Council members know what they’re doing. States Are Fighting Back: I don’t know if they have the authority to do this or not, but other municipalities have had their actions overturned by the state and blocked from future similar ordinances. According to an article on the New York Times website titled: Blue Cities Want to Make Their Own Rules. Red States Won’t Let Them., states have banned local ordinances from passing minimum wage increases and paid sick days. In St. Louis for example, a new State law takes effect on August 28th pre-empting the City’s minimum wage ordinance. Their $10 minimum only took effect on May 5, 2017. It was going to increase to $11 on January 1, 2018… but, no more. And in another example, just as the city of Birmingham passed a minimum wage ordinance, the State of Alabama passed a law pre-empting the City from regulating...