A new Federal Reserve Bank of Minneapolis study is providing data on the effects of minimum wage increases in Minnesota's Twin Cities, with researchers linking phased wage hikes to job losses and reduced hours for some workers.
The Minneapolis Municipal Minimum Wage Ordinance, first passed in 2017, established a plan to increase wages in phases toward $15 per hour by July 2024. As of January 1 of this year, Minneapolis' minimum wage stands at $16.37 for all employers. Neighboring St. Paul raised its rate to $16.37 for large businesses as part of similar phased increases.
The working paper found that the employment declines persisted even after accounting for the COVID-19 pandemic and civil unrest following George Floyd's killing in Minneapolis, two major disruptions that affected Twin Cities businesses during the study period through 2021.
What the Left Is Saying
Progressive leaders have defended wage increase policies as necessary measures to address rising living costs and support workers. Minnesota Gov. Tim Walz backed a $15 minimum wage statewide as a candidate in 2018, stating he would sign such legislation into law as governor.
On Facebook at the time, Walz wrote: 'My advocacy for a housing wage is directly tied to my support for a $15 minimum wage. $15 is an important place to start, but in many places across Minnesota, that still isn't enough for families to make ends meet.'
The study acknowledges that while employment declined, wages increased for workers who remained employed. Progressive advocates argue that higher pay helps working families offset rising costs of housing, healthcare and other expenses.
What the Right Is Saying
Critics of aggressive minimum wage policies seized on the Fed findings as validation of long-standing concerns about job-killing wage mandates. Social media commentators argued the data confirmed predictions made by economists who warned about reduced employment and hours.
'Workers are making more, but businesses are cutting back, research shows,' posted a local radio host on X. 'Oh really, you don't say?'
Others pointed to broader patterns they said demonstrated consistent economic harm from wage floors set above market rates. Conservative commentators argued the findings supported warnings that aggressive minimum wage policies reduce available jobs and hours while accelerating automation.
What the Numbers Show
The Federal Reserve Bank of Minneapolis study estimated job losses directly tied to minimum wage increases between 2017 and 2021: researchers calculated Minneapolis lost approximately 5,425 jobs and St. Paul lost roughly 3,797 jobs due to the policy changes.
Full-service restaurant employment fell nearly 36% in Minneapolis and approximately 20% in St. Paul between 2018 and 2023, according to data cited by the Minnesota Star Tribune from the Fed report.
The study stated: 'We demonstrate that establishments with larger exposure of their labor costs to the minimum wage experienced larger increases in their wage and larger declines in their jobs, hours, and wage bill.'
Restaurant sector employment was particularly affected. The federal minimum wage has remained at $7.25 per hour since 2009.
The Bottom Line
The Twin Cities study adds empirical data to an ongoing national debate over minimum wage policy. Researchers controlled for major economic disruptions including the pandemic and civil unrest, strengthening their findings about the direct effects of wage mandates on employment levels.
Supporters argue that higher wages benefit workers who keep their jobs despite broader employment declines. Opponents say job losses and reduced hours disproportionately harm entry-level workers and those seeking to enter the workforce. Both sides cite economic principles they say support their positions.
The federal minimum wage has remained unchanged at $7.25 since 2009, while progressive Democrats in Congress have proposed increases ranging from $15 to $30 per hour or more.