Former 3 term Mayor R.T. Ryback wrote an article in the Sunday, June 11, StarTribune supporting a tip credit to go with a $15 minimum wage hike in the city. The current city council and Mayor Betsy Hodges are poised to enact the wage increase without a minimum wage very soon now that Governor Dayton has vetoed the Uniform Labor Standards bill that passed both the House and Senate with bi-partisan support.
The Minneapolis Council and Mayor would be well served to read the editorial. Link to the editorial.
They owned a corner drugstore in Minneapolis in the 1960s. They were smack dab in the middle of the middle class, neither rich nor poor but making enough to afford a house and pay for the college educations that launched my brother, sister and me.
Then, within the course of a decade, their way of life virtually disappeared. Freeways ripped up city neighborhoods as shoppers sped their way to chain stores in suburban malls. Just like that, corner drugstores, bakeries, hardware stores and neighborhood grocers closed across the city.
Our store near Chicago and Franklin closed in 1970. In my neighborhood, the once-busy intersection of Penn and 50th, which had sported a drugstore, bakery, hardware store and grocery store, became mostly empty storefronts. Each time one of those stores closed, the path my family had taken to the middle class narrowed.
I tell this story because it shows the importance of small businesses in Minneapolis. Knowing corner drugstores and lots of other small shops aren’t around anymore means a lot of people have not been as lucky as I was. It’s one of the many reasons we have a growing gap between rich and poor with a shrinking middle.
The story of my parents, and of many others like them, is a cautionary tale about how fragile a small business can be. Because margins are often so thin, a change in traffic patterns, an unexpected jump in the cost of merchandise or changing trends can suddenly destabilize even the strongest enterprise.
I think about this as I watch with increasing concern the polarized debate about how the city of Minneapolis is going to implement a proposed $15-an-hour minimum wage in restaurants. The details matter. But first it’s important to understand the context of how the city’s restaurant industry grew to become what it is today:
For decades following the virtual extinction of corner retail concerns, commercial streets all over Minneapolis were pockmarked with vacancies. Then something wonderful started to happen. Arteries like Lake Street started coming back to life, largely because a new wave of immigrants put in the hard work to follow the same kind of path my parents took to the middle class.
The difference this time is there were not as many stores. For a while, video stores and tanning parlors had a run, but now those vacant storefronts were filling mostly with restaurants. Nicollet Avenue, once lined with shops, became “Eat Street,” with restaurants run by immigrants serving food from around the world. Coffee shops followed, and then the dam burst. Today you can walk through almost every neighborhood in the city and find corner stores reborn as vibrant restaurants. I like to think that behind a lot of them is a story of another family using this small business to get into the middle class.
An underappreciated part of the story is that these new business owners had a partnership with City Hall. I already hear snickering, because so many neighborhood business owners have horror stories to tell about licensing, zoning or some other obstacle government put in their way. Some of those complaints are valid, some not, but the fact remains that many of those restaurants now lighting up almost every part of Minneapolis are there in part because over the last couple decades they also got a lot of help from Minneapolis’ generous small-business loan program, active work opening neighborhoods to wine and beer licenses, encouragement of food trucks that became restaurants, help passing the “Surly Bill” that sparked the brewery and distillery boom, years of work on regulatory reform, and a lot more.
This public-private partnership that rebuilt our commercial corridors, and along with it reopened paths to the middle class my family took, is now in jeopardy as the minimum-wage debate becomes more polarized. The good news is that most people on both sides believe working people deserve a raise and, increasingly, even those who have raised concerns say people in restaurants should make $15 an hour.
The disagreement is that many restaurant owners and some servers want to take tips into account. They say servers could be guaranteed a lower base wage if their tips plus wages bring them more than $15 an hour in total. This arrangement, they argue, will make it more possible for restaurants to absorb the significant new expense of paying higher wages for the workers in the kitchen and the front of the house whose tips don’t bring them total pay of more than $15 an hour.
I expected some owners to raise these concerns. But what has surprised me is how many servers have stopped me in restaurants and on the street to say how worried they are that this new wage policy will abruptly change the customs and expectations around tipping — the tipping ecosystem — that allows many of them to make significantly more than $15 an hour.
The compromise now being proposed by most of the owners, and many servers, is to set the wage for most restaurant workers at $15 an hour but exempt tipped workers. This seems a reasonable concession to small businesses, many operating on narrow margins, who are being asked to absorb significant new expenses.
Remember, these new expenses will not be shared by restaurants in St. Paul and suburbs. Having been involved in a few hundred pitches to attract small businesses to Minneapolis, I can promise that this new competitive disadvantage will become a very major issue.
I am not an economist and can’t definitively tell you what economic impact this new proposal would have. I do, however, have a lot of experience in politics, and I can tell you with absolute certainty that the worst time to make such a far-reaching decision about economic futures of people running fragile small businesses is during an election year.
Campaigns are great times to hear what kind of city people want, because candidates are door-knocking, going to parks and hearing more directly from ordinary people than they will once they get to work at City Hall.
But when it comes time to actually turn your constituents’ visions into policy, you need nuance. This is in short supply when campaign debate moderators and endorsement questionnaires force candidates into simplistic, one-word answers.
Over time I have come to know many of our city’s restaurant owners. Some would complain about whatever plan came from City Hall. The vast majority are among the most hardworking, creative and socially committed people anywhere. The highest compliment I can give is they remind me of my parents. After scores of conversations with them and many servers over these past few months, I believe they are not blowing smoke when they say this proposal, if not amended to address tips, will have a very serious impact. I know that if my family’s store suddenly had faced such a significant new cost to absorb, they almost certainly would have been out of business.
I also know after one-on-one conversations with many of them in recent weeks that many more of them would be telling you this except they are deeply worried that speaking against this plan would harm their business.
Government and business cannot always be on the same page. That’s especially true when we see massive income disparities growing even bigger, and a new federal administration that seems hellbent on removing every consumer protection. But Minneapolis is not President Donald Trump’s Washington, and the small-business owners who light up our commercial corridors are not the Koch brothers. Our city, a beacon of justice in a dark time, is poised to give hardworking people a well-deserved raise. The only debate is how.
I believe the proposal on the table could do significant harm to our businesses and, in turn, do real damage to a vital part of city life. I don’t think it will completely plunge our commercial streets back into the dark days when my parents became dinosaurs. But I don’t want to find out.