Small business owners would lose out under Minneapolis' $15 minimum wage

The leading contenders in the 2017 Minneapolis mayoral race may actually think that moving toward a $15 per hour citywide minimum wage is a fine idea, but the practical reality seems to be that opposing it is not an option if you want to get elected.

Aswar Rahman is running for mayor, too, and he has more than reservations about the $15 per hour minimum wage. In fact, he said, "I'm terrified."

He fears the failure of smaller employers, businesses that are fragile simply because they're not very big, as they are forced to pay more for their labor. These are the businesses that provide a middle-class life for their bootstrapping owners. To pay one group more, are we really willing to knock some business owners back into poverty?

Rahman, an entrepreneur and filmmaker in his 20s, is probably too inexperienced to be considered anything but a long-shot for mayor. But he does have a thoughtful perspective on what it takes to bootstrap a small business in Minneapolis.

To be fair to all sides, there are competing visions of how to help people at the lower end of the income scale. Advocates for a higher minimum wage see it as a simple question: Whether there is the will to simply demand employers pay more.

Rahman has a compelling vision, too, of supporting people as they launch a business that could carry their families into the middle class. His thoughts were formed in part by his immigrant family's story — of a parent desperate for a better life for her kids who saw the best and maybe only chance through starting up a shop in a Minneapolis neighborhood.

If his mother's model is endangered by a $15 per hour minimum wage, and he thinks it will be, then enacting it is far from a no-brainer.

"That's the emotional connection to it, but the data is completely there, too," he said. "The disparity in business ownership is typically connected to the disparity in wealth. The means of generating wealth simply don't belong to the communities that are most economically disadvantaged."

"In my family, we would still be on food stamps if we'd stuck to the low-wage jobs," he added.

What's really missing from the conversation about a higher city-mandated minimum wage, Rahman said, is a clear understanding of who it is that will be paying more.

When advocates for a higher minimum wage justify it through arguments like "pumping money into the local economy" through higher wages, he's not sure they fully grasp that the additional money has to come from somebody.

A lot more Minneapolis jobs are with employers with more than 500 workers than small businesses, and in the case of a big national company like U.S. Bancorp, maybe that argument makes some sense.

But for the employees of a family business where the owner-manager lives nearby, mandating higher pay won't really pump money into the economy through higher wages. That's because the same money is being sucked out of the economy via the business owners' depleted checking account.

There seem to be benefits to business ownership beyond greater incomes, too, according to the Neighborhood Development Center (NDC) of St. Paul, a nonprofit that has long fostered entrepreneurship to improve the lives of people in Twin Cities neighborhoods that were traditionally home to lower-income families.

Owning your own business seems to have similar effects on low-income families to owning a house, which has been found to do everything from helping people live longer to seeing the kids get better grades in school.

NDC commissions an in-depth survey every other year, trying find out how all their businesses with the doors still open — about 550 as of last count — are faring. As described by Elisa Pluhar, NDC director of development and communications, the nonprofit also learns in these surveys about such things as whether the business is turning into a gathering spot for neighbors or if the business owners now consider themselves neighborhood role models.

They also ask about the owners' personal income, people who largely started out with nothing. "About 95 percent of people we train are considered low- to extremely low-income," Pluhar said. "It's pretty dire for a lot of these folks." Based on federal guidelines, the NDC entrepreneurs are coming from households of four that fall in annual income between about $15,000 to $25,000.

In the most recent NDC survey, about half of the business owners have enjoyed a bump in monthly income. The average increase comes to nearly $1,250 per month.

NDC features restaurant co-owner Hassan Ziadi in a short video, and the success of his Moroccan Flavors restaurant has been "transformative" for his family, Pluhar said. It's the story of an immigrant from Morocco who had been working three jobs at up to $10 per hour in restaurants before launching a family-owned restaurant in south Minneapolis.

Pluhar said when she last bumped into the owners they were talking about maybe even taking a family vacation. "In some crazy way, that's kind of the American dream," she said, "that you could just have enough extra money that maybe we could just take a week off. And that's never been a reality for them."

That story of Moroccan Flavors, of course, sounds a little like Rahman's mom's. At a recent mayoral candidate forum, Rahman said, he was hopeful a conversation would have taken place weighing the risk to small businesses and dreams of entrepreneurship like Ziadi's on one side with the needs of low-wage workers on the other. He was disappointed.

"We could have talked about that," Rahman said. "But … we went back to the same lingo, 'This will just push money into the economy, put money into peoples' pockets.' Meanwhile, my friend who owns a food truck is going to go out of ­business."