Minnesota looks to increase minimum wage

Published On: Jan 12 2013 06:00:54 PM CST   Updated On: Jan 12 2013 11:25:23 PM CST
WINONA, Minn. -- -

Daily expenses can add up quickly, leaving people making minimum wage in a tough spot.

That's why the Minnesota Legislature isĀ  working to pass a bill that would raise the state's minimum wage by more than a dollar.

Minnesota's minimum wage is at $6.15 an hour, if the proposed bill passes, it would bump it up to $7.50 an hour.

While it sounds like a big jump, economists say it may have little impact on workers' wallets.

With Democrats back in full control in the Minnesota State Legislature, they've targeted a minimum wage increase as a top priority.

But Winona State economic professor Don Salyards says it only sounds good in theory.

"Everybody would like to make five bucks more but it has a negative impact. It's a cost. It's like a tax. It's a cost on employers and they have to cut back," said Salyards.

Job loss is a side effect of a significant minimum wage increase, but Salyards says Minnesota's proposed bill that would raise the minimum wage to $7.50 an hour will likely have little impact positive or negative.

That's because most unskilled workers are already making more than the federal or state minimum wage.

"I think the equilibrium wage for unskilled workers is already $7.50 to $8 an hour so if you're going to impact employment and have people laid off, they'd have to have a minimum wage of $8 or$9 an hour. So I think it will have no effect on the market," said Salyards.

Just down the street at Yarnology, owner Gabby Peterson says the same.

"We don't have anyone making less than that so I'm assuming it's part of a process," said Peterson.

It's the process that has Peterson concerned.

The bill would make future increases automatic and linked to inflation.

"It's a little bit of a challenge for budgeting and short range and long range planning as a business owner because we don't know exactly where that will head and those things always make business owners nervous," said Peterson.

So if it has little impact on businesses and little benefit for workers, why bother with the bill at all?

"It's probably a political thing to sound good to the next election cycle. You can say to the lower wage workers, 'We're on your side.' It's probably a democratic proposal you know, you can pretty much predict that. 'We're on your side, we want to raise the minimum wage.' In reality, it won't really effect anybody because they're not raising it enough," said Salyards.

The minimum wage in Minnesota last went up in 2005.

If the bill is passed, it would go into effect at the beginning of Aug.

Wisconsin's minimum wage is the same as the federal minimum wage at $7.25 an hour.