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Introduction and summary
Minnesota's minimum wage has gone through several legislative changes since it took effect in 1974. In 2005, Minnesota began a series of minimum-wage increases, raising the full state minimum wage from $5.15 to $6.15 an hour. From July 2009 through July 2013, the full effective minimum wage was the federal rate of $7.25 an hour, because the state rate was $6.15. In 2014, legislation was passed to incrementally increase the full state minimum wage (for large employers), raising it to $8.00 an hour effective Aug. 1, 2014, to $9.00 an hour effective Aug. 1, 2015, and to $9.50 an hour, effective Aug. 1, 2016. A lower rate applied for small-employer and certain youth, training and J-1 visa worker minimum wages. Beginning Jan. 1, 2018, minimum-wage rates were annually indexed for inflation, with annual increases capped at 2.5%. The most recent legislative changes in 2024 increased the cap on inflation-indexing to 5% and eliminated the lower tier minimum wages for small-employers, youth under the age of 18 and J-1 visa workers for hotels, motels and lodging establishments, establishing a single state minimum wage at the large-employer rate. The law retained the lower 90-day training wage for workers under age 20. These changes will take effect Jan. 1, 2025.
In 2018 and 2020, respectively, the cities of Minneapolis and St. Paul introduced their own ordinances that require higher minimum wages than the state rate. With the introduction of municipal minimum wages in Minneapolis and St. Paul (all slated to incrementally reach $15.00 an hour at various points in the 2020s), minimum wage in Minnesota has become more nuanced, generating considerable discussion and research. The effective minimum wage – the rate employers are required to pay to covered employees – is the highest of any applicable federal, state or local rate.
To understand minimum wages in Minnesota, this report compares municipal minimum wages with the federal and state minimum-wage rates, how these rates have changed and how they will change, relative to prices and other wages over time. This report also addresses the following questions: How does the minimum wage in Minnesota compare to the minimum-wage rates in other states? How have the federal, state and municipal minimum wages changed over time relative to inflation? What proportion of jobs in Minnesota pay the minimum wage or less? Where does the minimum wage stand relative to the poverty level, cost of living and other wages? Some of the data presented in the report is also considered in the context of post-pandemic labor market and inflationary environment.