About the Minimum Wage

Updated July 2015

In the 2014 Legislative Session, Minnesota policymakers increased the state's minimum wage effective August 2014. Minnesota is no longer one of a handful of states with a minimum wage lower than the federal minimum wage. The higher wage means low-wage workers will regain lost purchasing power and find it easier to make ends meet. And since Minnesota has also joined a growing number of states that index their minimum wages to inflation, the wage will better keep up with increases in the cost of living.

Minnesota's Minimum Wage Tiers

Minnesota's new minimum wage standards have begun phasing in over three steps: 

  • Large employers: $8.00 per hour starting on August 1, 2014; $9.00 on August 1, 2015; and $9.50 on August 1, 2016.
  • Small employers: $6.50 per hour starting on August 1, 2014; $7.25 on August 1, 2015; and $7.75 on August 1, 2016.
  • Training wage (for employees ages 18 and 19 for the first 90 consecutive days of employment): $6.50 starting on August 1, 2014; $7.25 on August 1, 2015; and $7.75 on August 1, 2016.

 Two other wage tiers are created:

  • Youth wage (workers under 18): $6.50 starting on August 1, 2014; $7.25 on August 1, 2015; and $7.75 on August 1, 2016.
  • Hotel or resort workers under an Exchange Visitor non-immigrant visa for summer work who receive a lodging or food benefit: $7.25 starting on August 1, 2014; $7.50 on August 1, 2015; and $7.75 on August 1, 2016.

Minnesota matches federal definitions for small and large employers. Large employers have gross sales over $500,000 and small employers have gross sales under that amount. This replaces the previous state definition that set $625,000 as the dividing line between large and smaller employers.

Minnesota’s minimum wage law covers full-time and part-time employees, whether they are hourly, salaried or commissioned. Additionally, Minnesota tipped workers are subject to the same minimum wage standards as non-tipped employees.

Inflation Adjustments in Minnesota's Minimum Wage

Minnesota’s minimum wage will increase each year based on inflation starting in 2018 (commonly called “indexing”), so that it better keeps up with the cost of basic necessities.

The state will use the implicit price deflator calculated by the U.S. Department of Commerce's Bureau of Economic Analysis to measure the rate of inflation for the minimum wage. The inflationary increase is capped at 2.5 percent per year. The minimum wage will not be reduced in a year with negative inflation. 

The Commissioner of the Department of Labor and Industry has the option of suspending an annual minimum wage increase after consulting with Minnesota Management and Budget if economic indicators, such as GDP, consumer confidence, and the state unemployment rate show "potential for a substantial downturn in the state’s economy." In this case, the commissioner will issue this order no later than September 30 of the year prior to the change, and the state will hold a public hearing and have a public comment period.

In the years after a wage increase is prevented, the Commissioner can make supplemental increases in the minimum wage to catch up. Such a supplemental increase does not count toward the 2.5 percent cap on inflationary increases.

Additional Resources

 

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