More than half-a-million workers would get a pay raise if the state breaks with federal policy and raises its minimum wage to $7 an hour, a leading economist at the University of Minnesota says.

Better yet, raising the minimum wage is likely to strengthen Minnesota?s economy. It should not, as opponents argue, cost the state jobs, says Ann Markusen, director of the Project on Regional and Industrial Economics at the university?s Humphrey Institute.

Thirteen states already have a minimum wage higher than the federal minimum, but Minnesota?s minimum is the same as the federal rate: $5.15 an hour for most workers. Because neither Minnesota nor the U.S. adjusts the minimum wage for inflation, the rate has lost much of its buying power since it first took effect in 1997, Markusen says.

To keep the same buying power that the minimum wage had at its peak, it would need to be more than $8. ?I would argue that we really need a wage of $12 an hour to meet the minimum needs? of low-wage workers, she says. But $7 an hour should be doable politically while still providing significant help to the lowest-paid workers, Markusen says.

"Almost everyone understands the difficulty of working for minimum wage," economist Ann Markusen says. Union Advocate photo

Higher pay, no job loss
Workers who earn between $5.15 and $7 are not the only ones who could benefit. Evidence shows that workers who are illegally paid a subminimum wage and workers who earn up to about $8.50 an hour also will see their pay increase, she says.

The fact that these workers tend to spend, rather than save, any increases in income is only one reason the state?s economy actually could benefit from a higher minimum wage, Markusen says.

Basic logic suggests that the state would collect higher tax revenue at the same time its costs for welfare and other social services decrease. Most of the workers who benefit are female, young, single heads of households, live in rural Minnesota, or have a high school diploma at best, she says.

In addition, most of the workers who benefit are in the retail, restaurant and service sectors, according to government statistics. These businesses compete against each other in a local, not global, job market, she says; after all, the jobs of retail cashiers and restaurant waitresses can?t be shipped to another country. For the businesses most affected, competitors also are affected, meaning none gains a competitive advantage. The result: A higher minimum wage does not cost a state jobs ? a point on which there is substantial evidence and broad consensus among economists, she says.

A legislative priority
Brad Lehto, legislative director for the Minnesota AFL-CIO, said raising the minimum wage is one of labor?s legislative priorities in the session that begins Feb. 2. The labor federation has been meeting with Senate leaders on the issue, he said. ?Realistically, is it going to get anywhere? I don?t know.?

Lehto also warned that any attempt to raise the minimum wage will be met with an attempt to institute a tip penalty. Such legislation would allow restaurant and bar employees who receive tips to be paid less than minimum wage. That practice has been outlawed in Minnesota since 1987.

Markusen made her comments Jan. 22 at a lunchtime forum at the Minnesota AFL-CIO, part of an ongoing series of discussions organized by the DFL Education Foundation.

Adapted from The Union Advocate, the official newspaper of the St. Paul Trades and Labor Assembly. E-mail The Advocate at: advocate@mtn.org