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28 February 2015

Minnesota is Misrepresenting the Effects of Higher Taxes and Minimum Wages

It is being claimed that higher taxes on high income persons and increases in the minimum wage are the key to jobs creation and a fast-growing economy.  The example of Minnesota since Democrat Gov. Dayton took over is being used to "prove" this.

Gov. Dayton certainly benefited relative to Gov. Pawlenty in that he became Gov. in the year that the recovery from the Great Recession began, however meekly. He did not create the 172,000 jobs either. But let us note that 172,000 jobs in two years is just barely a match for an anemic population growth.

The article notes that the Minnesota median income advantage relative to the national average actually fell by $2,000 from 2012-2013 to now. It was not noted that the cost of living in Minnesota relative to the national average is going up as well. The combination of a rising cost of living and a falling median income, both relative to the nation, is not good.

While the minimum wage is to go up to $9.50/hr. for large employers by 2018, it will go up to only $7.75/hr. for small employers who employ most people. There are special provisions for a 90-day training period for workers under 20 years old and for all workers under 18 with a minimum wage of $6.50/hr. There are many states with no such provisions.

Furthermore, the private sector job growth in Minnesota from Q1 of 2013 to Q1 of 2014 showed Minnesota to be dead last in the Midwest in private sector job creation. Its 0.8% increase in private sector jobs was behind the next worst state in the Midwest, Illinois at 1.2%.

Gov. Dayton is probably not claiming that he caused a relative decrease in the median income with an increase in the relative cost of living.  And now that businesses have had time to react to his higher taxes and mandated higher wage costs, he is surely not claiming credit for Minnesota being dead last in private sector jobs creation in the Midwest.

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