When it comes to minimum wage, North Dakota and its neighbors go opposite directions
North Dakota's minimum wage policies vary significantly from its neighbors Minnesota, Montana and South Dakota. The three bordering states all have minimum wages higher than the federal rate and make annual adjustments to their respective minimum wages.
FARGO — A proposal to raise the minimum wage in North Dakota to $15 an hour by 2027 met a fairly predictable fate Tuesday, Feb. 16, in Bismarck.
After the House Industry, Business and Labor Committee voted 12-2 to give the bill a "do not pass" recommendation, House Bill 1341 was practically dead on arrival when it was returned to the House for a vote. Republicans, who generally oppose minimum wage increases, outnumber Democrats in the chamber by an 80-14 margin.
HB 1341 failed to pass after 79 Republicans and even three Democrats, Reps. Tracy Boe (Mylo), Alisa Mitskog (Wahpeton) and Corey Mock (Grand Forks), voted against the proposal. Fargo Republican Rep. Mary Johnson was the lone member of her party to vote alongside 11 Democrats in favor of the bill.
Rep. LaurieBeth Hager, the Fargo Democrat behind the proposal, told The Forum she was keeping the best interests of the state's lowest wage earners in mind, but acknowledged there would be "some circumstances" that would affect business.
"I only see the person that’s making $7.25 an hour," Hager said. "I look at it through the eyes of the people who are only able to earn that much money."
Hager — the bill's lone sponsor — proposed gradual increases to the state’s minimum wage, starting at $9 per hour beginning this August before reaching $15 per hour in 2027. The gradual rise was "put in with businesses in mind," Hager said. "If you double the minimum wage, you basically are paying one employee for the price of two,' she continued.
She believed the state's current minimum wage of $7.25 per hour hurts its efforts to raise people out of poverty and recruit new residents as well. "For people coming into the state, I think they look at things like that," Hager said.
North Dakota is surrounded by states with higher minimum wages, according to the United States Department of Labor .
Montana offers a minimum wage of $8.75 per hour, while South Dakota's is $9.45 per hour.
Hager noted that North Dakotans living in Red River border communities can easily work in Minnesota — where the minimum wage is currently $10.08 per hour for employers with annual gross revenues north of $500,000 and $8.21 for employers with gross revenues below that amount — to earn a higher wage.
Two of the state's main populations centers, Fargo and Grand Forks, border Minnesota, as does Wahpeton, which is home to roughly 7,300 residents and borders Breckenridge. "I do believe, in Fargo especially, (it has an impact on the labor market)," Hager said. "I do believe that the differential rate is not keeping people living in our state."
The Twin Cities also offer municipal minimum wages which are higher than those in greater Minnesota.
In Minneapolis, the current minimum wage is $13.25 per hour for employers with more than 100 employees and $11.75 per hour for employers with fewer than 100 employees. St. Paul's minimum wages currently range from $9.25 to $12.50 across four different brackets based on the number of employees.
Employees working for the largest of employers in each city will reach the much-discussed $15 per hour rate on July 1, 2022. All Minneapolis employees will reach $15 per hour two years later, while all St. Paul employees will reach the mark in 2028.
The Twin Cities are moving into new horizons on the minimum wage front, David Berry, a research scientist for Minnesota Department of Labor and Industry, told The Forum.
"The Minneapolis and St. Paul minimum wages are going up year-by-year at a rate that is specified by the ordinances of those cities. They are increasing rapidly," he said. "The whole $15 an hour minimum wage — where it has been enacted in some other municipalities in the United States — is going into really uncharted territory with regard to where the minimum wage sits relative to other wages and prices."
In terms of inflation-adjusted 2020 dollars, the $15 minimum wage will far exceed any level the federal minimum wage has ever reached, Berry noted. In 1968, the federal minimum wage peaked at $12.24 an hour in 2020 dollars but has decreased since.
"One interesting thing to look at, when you adjust for inflation, is the minimum wage has varied quite a bit over time," Berry continued. "In inflation-adjusted terms, it continues to be less and less real purchasing power."
If unaltered, Minnesota's 2020 minimum wage report forecasted that the purchasing power of the federal minimum wage will continue to fall, dropping to $6.25 an hour by 2028.
Meanwhile, the purchasing power of greater Minnesota's minimum wage will experience a slower decrease because the rate is indexed to inflation.
"The Minnesota minimum wage, although it's increased, it's just an effort to hold the purchasing power constant," Berry remarked.
Both South Dakota and Montana also make annual cost-of-living adjustments to their minimum wages, though both states use the Consumer Price Index while Minnesota uses an adjusted version of the Personal Consumption Expenditures Index.
According to Berry, anywhere between 245,000 and 261,000 Minnesotans worked at or below the minimum wage in February of 2020, the last month before COVID-19 rocked the economy nationwide.
That number will only increase in the coming years, Berry said, but the rise won't be as bad as it sounds for workers.
"Especially with Minneapolis and St. Paul, because the minimum wages are rising in those cities, the total number of people working at the minimum wage will be going up," he said.
For that reason, estimating the number of employees in the state who are earning at or below minimum wage is "a moving target," he noted.
Data from Job Service North Dakota's Labor Market Information Center said that the lowest reported hourly entry wage in the state is $8.06. The data is based on a sample-based survey from the Bureau of Labor Statistics' Occupational Employment Statistics program and is limited to employers who fall under federal or state unemployment insurance laws.
That isn't to say that all North Dakotans earn more than the state's $7.25 minimum wage, Marcia Havens, the manager of the Labor Market Information Center, explained. Job Service North Dakota's figures are estimates and entry wage statistics are calculated as an average of the bottom-third wages for a given occupation. The estimate also assumes that the lowest earners are also a firm's shortest tenured as the Occupational Employment Statistics program does not request tenure information, she said.
In North Dakota, it is estimated that 47% of the state’s estimated 422,520 employees earn an entry wage below the oft-discussed $15 minimum wage, while 8% work for an entry wage of less than $10 per hour.
The federal minimum wage appeared to be on track to increase after the House of Representatives included it in their version of President Joe Biden’s $1.9 trillion American Rescue Plan. The increase was ultimately scrapped in the Senate’s version of the bill after Senate Parliamentarian Elizabeth MacDonough determined it could not be included because Democrats aimed to pass the bill through the reconciliation process.
In Bismarck, Rep. LaurieBeth Hager had hoped her bill would have found more traction on the House floor than it did in committee, but the bill was rejected by similar margins in both.
For now, despite the fact that all of its neighbors have codified minimum wage increases, North Dakota's will hold at $7.25, in lockstep with the federal standard.
Although her bill failed to pass, Hager said COVID-19 has "heightened" the need for the state to examine how to elevate its lowest-earning residents out of poverty.
"The business perspective is there and I know that they may end up making changes, but my perspective is truly focused on people that are living in poverty," Hager concluded.
This is the first in a series of stories about raising the minimum wage. If you are an employee or business owner willing to discuss how a higher wage may affect you, email reporter Thomas Evanella at email@example.com.