Evaluation of a Minimum Wage Increase in Minneapolis and Hennepin/Ramsey County

Source: University of Minnesota, The Roy Wilkins Center for Human Relations and Social Justice, Humphrey School of Public Affairs, Technical Report, September 2016

The Roy Wilkins Center replicated the techniques used in prevalent economic literature to simulate the relative impact of a local minimum wage increase in the city of Minneapolis and in Hennepin/Ramsey County. These simulated minimum wage changes are at the $12 and $15 per hour levels. The research team finds the following:
– The industries with the largest number of persons likely to be affected by the change in minimum wage are food service, retail, non-hospital health, and administrative support ….

Minimum wage earners in Minneapolis often
o Have at least some college education
o Are not currently in school
o Work at least 35 hours per week
o Are over age 25

Firms that currently pay the $9.50 minimum wage in Minneapolis often
o Are eligible to pay the current lower minimum wage of $7.75 as a small business
o Will increase prices of food by less than 5% to cover labor costs of a $12/$15 minimum wage
o Face lower employee turnover after an increase in the minimum wage

Current literature on the minimum wage suggests
o Increases in average employee monthly earnings vary by industry
o Average employee monthly earnings in the Minneapolis metropolitan area are more sensitive to the minimum wage than the country as a whole
o Most estimates of the change in workforce participation find no statistically significant change after a minimum wage increase

Households with minimum wage earners in Minneapolis
o Are currently less likely than the general public to meet their food needs
o Are likely to spend $27 more a week to meet their food needs after the proposed increase in the
minimum wage
o Would face food insecurity 4-7% less often under the proposed policy

Immigrant workers earning the minimum wage in Minneapolis
o Are slightly more responsive to an increase in the minimum wage than the general population
o Are especially more responsive to an increase in the minimum wage if they are recent immigrants in a low skill job

Nonwhite employees are more likely to be affected by an increase in the minimum wage than white workers, when controlling for the number of workers in each group
o Minority Owned Business Enterprises are, however, likely to face smaller changes in payroll costs after a change in the minimum wage, as fewer minority owned enterprises qualify to pay their workers a reduced minimum wage

Firms within industries with relatively few minimum wage workers are not very likely to see a large change in their operating costs as a result of the proposed minimum wage

Firms within industries with relatively many minimum wage workers may see an increase in their operating costs, however, if employee earnings increase by a smaller rate than we simulate, the change in labor cost would be smaller as well…..