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ST. PAUL, Minn. - The minimum wage in Minnesota will rise to $9.50 per hour by August 2016, under the terms of an accord reached by House and Senate leaders Monday. The current minimum wage in the state is $6.15, but most workers make the federal minimum of $7.25.

"By raising the minimum wage we begin to make Minnesota's economy better reflect that core value that work matters, and that all Minnesotans deserve the dignity of supporting themselves through work," Rep. Ryan Winkler, the Golden Valley Democrat who authored the House version of the bill, told reporters at the State Capitol.

Winkler said the proposal, if passed and signed into law by Gov. Mark Dayton, will raise pay for 360,000 people in Minnesota. He noted studies that show people at low wage levels are most likely to spend that new income, returning it to the economy.

Both the House and Senate passed minimum wage bills during the 2013 session, and the pact announced Monday is a hybrid of the two versions. It will likely be voted on in the full Senate Wednesday, with a showdown in the House set for Thursday.

The bill would boost the state minimum wage from the current $6.15 an hour mark to $9.50 in phases between August 2014 and August of 2016. The rate would go to $8.00 per hour this August, then move to $9.00 in August of 2015, before topping out at $9.50 a year later.

For small employers, those with annual gross sales of less than $500,000, the minimum hourly rate would go from $5.25 to $7.75 over the same period.

"I think we've got a pretty strong provision for small employers, largely located on main streets across rural Minnesota," Senate Majority Leader Tom Bakk of Cook remarked.

For the first time ever the state's minimum would be indexed to the cost of living, allowing for automatic increases of up to 2.5 percent beginning in the year 2018.

But there's an "off ramp" to that auto pilot facet of the proposed law. Those indexed raises could be undone during economic downturns by order of the Commissioner of Labor and Industry, based on a set of key economic indicators.

"Things like GDP growth, consumer confidence index, unemployment rate, all are among the things the commissioner will consider when making a decision whether a suspension of the inflation index is in order," Sen. Bakk explained.

The bill also provides an exception for workers below the age of 18, allowing a lower minimum wage for 16-year-old and 17-year-old employees. The minimum for those younger employees would go from $6.15 per hour under current law to $7.75 an hour by August of 2016.

Sen. Bakk said that part of the legislation is an effort to answer those who've said a higher minimum wage will deprive teens of part-time starter jobs.

"At some level you make teenagers very difficult to employ. Those workers coming for the first time into the work force at 16 or 17 years old, really with no skill set yet."

House Speaker Paul Thissen said the wage boost is the latest in a series of the DFL-controlled legislature's efforts to raise the standard of living for Minnesotans, including property tax relief, investment in all-day kindergarten and freezing college tuition.

"No Minnesotan should work a 40-hour work week and have to continue to live in poverty," Rep. Thissen said.

After the DFL vacated the press conference lectern, reporters heard from Sen. Dave Thompson and Rep. Kurt Zellers, two Republicans seeking to replace Gov. Dayton.

"The people they're claiming to help are the people that are going to lose their jobs," Rep. Zellers said.

"The experienced waiters and waitresses who've been there longer are going to keep their jobs. The people wanting to get started in this business will not. They won't get hired now because of this minimum wage increase."

Dan McElroy, a lobbyist for the hospitality industry, said his group isn't opposed in principal to the minimum wage increase but asserted it was too much of a jump.

"We liked the Star Tribune position, and the South Dakota approach, which would've gotten us to $8.50," McElroy, a former state legislator and one-time Commissioner of Employment and Economic Development in the Pawlenty administration said.

He said the restaurant and tourism industry is pleased to see the exception allowing a lower minimum wage for those under 18.

But his organization had hoped to see a two-tiered wage system for tipped employees, such as restaurant servers. Hospitality Minnesota's proposal would allow tipped workers to be paid $7.25 if they average at least $12 per hour in wages and tips combined.

If tips in that pay period don't allow the employee to reach that $12 average hourly mark, they can be paid more wages to to reach that $12 threshold. All of the states bordering Minnesota allow restaurants to pay servers less full minimum through a "tip credit" provision in their minimum wage laws.

McElroy said he worries more dining establishments will move away from table servers altogether, if the cost of labor becomes too much of a burden.

"I don't want when my relatives are having their 70th birthday party for grandma to have to carry her own food to the table or go to the bar and get her own drink," he said.

"That's not my idea of the tradition of making memories in full service restaurants I want for Minnesota."

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