AUSTIN — One business could raise rates, another could reduce its hours of operation and others could be more cautious when it comes to hiring.

With Minnesota’s minimum wage set to increase from $6.15 to $8 per hour on Friday, several local businesses are already preparing for the new normal.

“It’s the new reality, and we need to figure out how we’re going to deal with it,” YMCA Executive Director Tedd Maxfield said.

In April, the state legislature passed a bill giving Minnesota one of the nation’s most generous pay floors after years of being among the states with the lowest minimum wage.

After increasing to $8 per hour this year, the minimum wage goes to $9 next year and $9.50 the year after. The federal minimum wage is $7.25 per hour. In future years, the rate could rise by 2.5 percent through an inflationary mechanism. Those future hikes could be suspended if the economy stumbles, but officials could authorize catch-up increases once times improve.

All employers won’t be bound by the same wage rules. The bill preserves a tiered structure the state currently has. Businesses with gross sales beneath $500,000 will see the wage top out at $7.75 in 2016. Workers younger than 20 would be subject to a lower temporary training wage and companies could continue paying 16 and 17 year olds less.

Austin Area Chamber of Commerce Executive Director Sandy Forstner expects the higher wages will make business owners hesitant to fill positions.

“I think you’re going to see people get a little bit more selective on hiring,” he said.

The increased wage will affect several employees at Austin’s YMCA, which employs more than 100 people, many of them part-time or first-time workers.

“It will have a large effect on us,” Maxfield said.

The YMCA is considering increasing membership and program fees, which — if approved — could take effect in September with the start of the business’s new fiscal year.

But its not just wages, as other costs are increasing at the YMCA. Maxfield said insurance rates, utilities, chemical costs for the pool and other building costs have also increased.

All businesses, Maxfield said, will have to decide whether to cut into profit margins, cut services or make other changes.

“That money is coming from somewhere,” he said.

Steve’s Pizza owner Steve Davis said he may reduce business hours to offset the change, as the business is open some nights until 2 a.m. He doesn’t plan to cut any positions, as that would affect service.

“You have to bite the bullet and be as efficient as you can be,” Davis said.

Perkins managing partner Larry Eisenberg said they’ll have to sharpen their pencils and make sure they’re running a good operation.

“It’s part of business,” he said.

With the cost of living increasing, Maxfield noted periodic wage increases are necessary. Minnesota last raised its minimum wage in 2005.

“I feel like it’s probably over due,” he said.

Several business owners are taking the change in stride.

“If it helps people and they work more efficiently I am all for it,” Davis said.

Hy-Vee manager Todd Hepler described the change as a positive, as more people will have flexible spending.

“It’s a positive step to improving our community,” he said.

Of Hy-Vee’s more than 300 employees, the change only affected about 30 or 40, and the company already made sure they’re above the new threshold, according to Hepler.

Officials for Austin’s largest employer, Hormel Foods Corp., said the company’s employees are already over the new minimum wage threshold.

Several legislators were critical of the incremental increases and inflationary increases, but Davis described that as a better option than one larger increase.

“As long as it’s done that way, it’s OK,” Davis said.

As a manager, Maxfield said he hopes workers strive to advance through furthering education or a strong work ethic, rather than just the minimum wage change.

“I hope people don’t look at the minimum wage increase as only opportunity to advance themselves,” Maxfield said.

 

How’d we get here?

The Minnesota Legislature passed the minimum wage increase in April with only Democratic votes after Republicans said it would cause hardship on businesses and narrow opportunities for those the legislation is designed to help.

Democratic backers hailed the bill as an overdue raise for more than 350,000 people making the least now. They said people in that situation tend to spend what they make quickly, helping cycle money into the local economy.

“There are a significant amount of parents raising families who are on minimum wage jobs,” Rep. Jeanne Poppe, DFL-Austin, told the Herald in April. “This allows them to spend more, allows them to pay more and allows them to support their families.”

Poppe voted for the bill.

Not all Democratic lawmakers supported the measure, however. Sen. Dan Sparks, DFL-Austin, was one of three Democrats who voted against the bill in the Senate. In April, Sparks said he supported raising the minimum wage but didn’t know if $9.50 would be best for rural areas.

Republican lawmakers relayed concerns from business groups that the wage is rising too much too fast. They warned it would be a crushing blow on grocery stores and restaurants, causing them to raise prices or pare back employee rolls.

“I’m sure Minnesota will survive after this happens but a lot of people won’t get that first line on their resume,” said Republican Rep. Bob Gunther, a retired grocer from Fairmont. “It’s going to be fair for some people. It’s going to be devastating for others.”

The Associated Press contributed to this report.