State Senator Seeks Nonprofit Exemption to Minnesota’s New Minimum Wage Law

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February 15, 2015; St. Cloud Times

It’s the classic story of politics making strange bedfellows—a Minnesota state legislator from St. Cloud is proposing an exemption from the state’s new higher state minimum wage law for nonprofits. (Before we go on, we want to draw your attention to a powerful piece on nonprofits and the minimum wage that we published last week.)

The St. Cloud Times reports that Republican Sen. John Pederson has authored a bill that would reduce the minimum wage that tax-exempt nonprofit organizations would have to pay. The paper reports that the proposal is being met with mixed reaction; some nonprofits say it would help them cope with the budget impacts of the increase, but others say they already pay their workers above minimum wage, so the exemption wouldn’t help them.

Pederson told the paper, “Nonprofits need time to raise enough money to cover the payroll increases due to the new law. Nonprofits would still have to pay as competitively as other local businesses or their workers would seek jobs elsewhere.”

The law took effect in August, raising the minimum wage for large employers to $8 an hour and to $6.50 for small employers; it also increases incrementally over the next several years. Pederson’s bill would allow nonprofits to pay $6.15 an hour.

The article cites one example: the Boys & Girls Clubs of Central Minnesota. Nearly 80 percent of its employees are college students who work part time, and as a result of the minimum wage increase, the organization is anticipating a $220,000 budget increase by 2016.

Ironically, the Boys & Girls Club isn’t sure it will support the bill because if it pays wages that are too low, it will be unable to attract youth guidance counselors. The bill also presents the leaders of nonprofits that advocate for low-income families and the working poor with a dilemma that goes to the heart of the matter. They advocated for the minimum wage increase on behalf of their clients, so to now push for an exemption for themselves might be seen as hypocritical.

The Minnesota Council of Nonprofits is not supporting the bill. It told the Times that while it understands the financial challenges nonprofits are facing as a result of the increase, exempting them may make it more difficult to recruit and retain employees, which often involves caring for families and children. A survey of its members found that most paid above minimum wage and felt they were able to adjust to the increase.

The paper says that this not “the only Republican attempt to weaken or roll back the minimum wage increase, which was supported by Gov. Mark Dayton and passed by a DFL-controlled Legislature.” The president of the St. Cloud Area Chamber of Commerce hopes Pederson’s bill will lead to a broader discussion of the minimum wage law, and possibly changes to the built-in increases, saying that an increase in nonprofits’ costs will lead them to ask businesses to fill that gap with donations. A member of the state’s House is considering sponsoring its own version of the bill.—Larry Kaplan