SAINT PAUL, Minn. — A number of employment-related policies and laws took effect this week in Minnesota with the start of the New Year, including another gradual minimum wage increase and a new law banning employers from asking job recruits about their previous salaries.
Here's what you need to know about both:
Minimum Wage
Starting Jan. 1, the statewide minimum wage in Minnesota increased again to keep pace with inflation, through a structure first enacted by the state legislature in 2014. Large employers must now pay $10.85 per hour and small employers must pay $8.85 per hour.
The cities of Minneapolis and St. Paul also have their own minimum wage standards, due to local ordinances passed in 2017 and 2018, respectively. In Minneapolis, the minimum wage for large employers (more than 100 employees) increased to $15.57 on Jan. 1. For small businesses, the minimum wage rates have been changing each July. They're currently required to pay $14.50, but they'll also reach the $15.57 mark effective July 1, 2024.
In St. Paul, "macro businesses" of more than 10,000 employees are required to pay the $15.57 wage as of Jan. 1. Large businesses (101 to 10,000 employees) will hit that mark in July 2024. Small businesses in St. Paul (6 to 100 employees) will see an increase to $14 in July 2024 and then $15 in July 2025, while "micro businesses" of five or fewer employees will jump to $12.25 this July and $13.25 next summer.
The $15 minimum wage, which will be the rate for all large and small businesses in Minneapolis and St. Paul by next summer, has long been a goal of labor groups and activists across the country. They view $15-per-hour as a threshold for providing a living wage to the lowest-paid workers in the U.S. As one City of Minneapolis official told KARE 11 in 2018, the gradual minimum wage increases "mean more money that they're taking home and putting in their pockets every day."
However, business owners in Minnesota have expressed concern about how the minimum wage increases impact their bottom lines. Research from the Federal Reserve Bank of Minneapolis found last year that these policies in Minneapolis and St. Paul "resulted in higher wages and lower employment," and that "the largest effects are found in the restaurant and the retail industries, in lower-paying establishments, and for lower-paid workers."
John Reynolds, the Minnesota State Director for the National Federation of Independent Business, said the continued wage increases are "just one more thing piled on."
"You've got to really step back and ask, who are the winners and losers from this?" Reynolds said. "And it's not just the small businesses themselves, but also workers looking or that first or second opportunity in a low-wage job. They're just not there because small businesses, in particular, cannot afford to pay more for workers right now."
Compensation History Law
As of Jan. 1, a new state law now makes it illegal for employers in Minnesota to ask job candidates about their previous salaries. Employers cannot ask about this information during the application process, during an interview, or during salary negotiations, although the job-seeker can voluntarily provide their previous salary if they choose. The Minnesota Department of Human Rights argues that "this new law will bring Minnesota one step closer to narrowing the gender and racial pay gap."
Moshe Barach, an assistant professor at the University of Minnesota's Carlson School of Management, has done extensive research on the topic of compensation history. He worked on a field experiment that tested what happened when employers could not ask about previous wages. Under these conditions, the research found that employers conducted more thorough interview processes, hired workers they might not have previously considered, and offered higher wages to job-seekers during negotiations.
"We know there is a good amount of discrimination in the labor market. Thus, if employers were to peg current wages to past wages, it could prohibit workers from increasing their wage over time," Barach said. "To us, our paper sort of lends credence to the idea that especially workers that are disadvantaged in the labor market — women, minorities, those who don't have traditional backgrounds — this might increase their wages over time, assuming that they move jobs."
As a representative of small businesses in Minnesota, John Reynolds said the new salary history law has also been on his radar in 2024. He said he understands the premise behind the change, but he argued it might lead businesses to waste valuable time interviewing job candidates whose salaries they won't ultimately be able to match.
"This is a well-intentioned law that's just trying to make sure there is parity in how people are paid and that people aren't disadvantaged because of something that happened in their work history that isn't their fault," Reynolds said. "The reality is, for small employers who are doing all the interviewing and the hiring process themselves, understanding what an applicant's past pay is, allows them to tailor their applicant pool to people who really are going to want the job."
Barach said his research found that employers would have to spend more time in interviews, but he said that may actually lead them to find better candidates.
"I think there has been some concern from employers about this limiting their ability to hire, but our findings don't seem to lend too much credence to that kind of story," Barach said. "They will exert more effort, but our findings say that employers are going to adapt really quickly and fundamentally alter the way they hire."
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