A proposed minimum wage hike in Minnesota would keep East Grand Forks restaurants and bars at a competitive disadvantage with their counterparts across the river in North Dakota.
The Minnesota House voted Thursday to increase the state's $6.15 an hour minimum wage for large employers (employers with annual gross sales of $625,000 or more) by 75 cents in July and another dollar by next summer. The state's $5.25 an hour minimum wage for small employers (employers with annual gross sales of less than $625,000) would increase by 50 cents in July and another dollar in 2009.
But North Dakota's $5.85 per hour minimum wage is set to increase to $6.55 per hour in July and $7.25 an hour in July 2009, somewhat tempering the potential impact on Minnesota border towns.
"It's just the way it is," said Greg Stennes, co-owner and manager of Whitey's in East Grand Forks. "We feel it more in a border community because we have to compete. It's nice that North Dakota is going up at the same time so we don't aggravate our problems more. If we go up and they don't, it just makes it more difficult to compete."
But the bigger obstacle for some Minnesota business owners is that North Dakota allows establishments to apply tip credits to employees who regularly receive more than $30 a month in tips. Those employees in North Dakota can be paid a minimum cash wage of as low as $3.92 per hour, which will increase to $4.39 an hour in July and $4.86 an hour in July 2009, so long as the employee's wages and tips at least equal the minimum wage.
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Minnesota has no tip credit for servers, wait staff or bartenders.
Stennes said Whitey's tipped employees log about 18,000 hours a year, therefore a $1-an-hour tip credit would add another $18,000 to the establishment's bottom line every year.
Aside from the already existing disparity between Minnesota and North Dakota minimum wages, Job Service North Dakota Regional Manager Keith Reitmeier said he didn't expect an increase in Minnesota's minimum wage to have much local impact.
"There are not many people working minimum wage in the area anymore," he said. "It's mostly entry level and at restaurants. I don't think many of them stay at that wage too long."
Reitmeier said a 2006 Job Service North Dakota study found that just 1.4 percent of the job listings received by the organization from employers were for minimum wage jobs.
He said it could have a minor effect on increasing the wages of some who make one step above minimum wage.
"Whenever wages go up, there could be some upward pressure on salaries," Reitmeier said. "I could see some wages creeping up on the lower end of our wages, but not a lot."
