Minnesota Governor Mark Dayton signed a minimum wage law this week that represents a 55% jump by the time all increases take effect in 2016.
The impact on dairy farmers is less onerous because most already pay well above state-mandated wage minimums. The current Minnesota minimum wage is $6.15 per hour. It jumps to $8/hour in August, to $9/hour in August 2015, and to $9.50/hour in August 2016. Smaller firms, those with less than $500,000 in gross revenues, will have minimum wages capped at $7.75/hour. After August 2016, minimum wages will be indexed to inflation.
Maryland also increased its minimum wage as well this spring. It’s minimum wage jumps from $7.25 today to $8 January 1, 2015 and then incrementally ratchets up to $10.10/cwt by July 1, 2018.
Most dairy farms already pay $10/hour or more to attract a scarce labor pool. In Minnesota, the rub comes in overtime pay, says Bob Lefebvre, executive director of the Minnesota Milk Producers Association. Unlike neighboring states, Minnesota requires employers to pay time and half wage rates once an employee reaches 48 hours per week. That means employers will have to pay $14.25/hour once over-time is triggered.
In addition, the 48-hour overtime rule also has a formula to calculate salaried-worker minimum levels. That works out to about a minimum wage of $32,350 per year for salaried employees.
What all this means is that dairy farmers might simply limit work hours to less than 48 hours per week to avoid triggering over-time rules.
The higher wage rates also put Minnesota at a competitive disadvantage compared to Iowa, South Dakota and Wisconsin, where the minimum wage remains at $7.25 per hour. "Dairymen from California or Idaho looking to relocate to the Midwest also might not move to Minnesota but opt for South Dakota because the milk price is basically the same and wage rates are lower," says Lefebvre.
As in Minnesota, most Maryland farmers already pay above current minimum wage rates, says Dale Johnson, a Maryland Extension farm management specialist. But it will make it more difficult competing for high school student labor who will now make as much doing easier jobs, such as in fast food restaurants.
What the new wage rates will also do is drive more dairy farms toward automated milking systems. These increasing wage rates make robotic milking systems that much more competitive, he says.
To view minimum wage rates nationally, click here.