MINNESOTA (WXOW) – The minimum wage in Minnesota increased to $11.41 per hour at the start of 2026.
The updated wage policy is beneficial for employees but poses challenges for small business owners.
The 28-cent wage hike, though seemingly minor, adds pressure to small businesses already struggling with inflation. Lori Kadlec, owner of Kaddy’s Kafe, expressed concerns about adjusting menu prices if costs continue to rise.
“We try not to put that back onto our customers, but I know if it continues, and food prices continue to go up as well, we’ll probably have to redo our menus,” Kadlec said.
The wage increase, effective January 1st, follows a trend of inflation adjustments that have doubled from the previous cap of 2.5% to 5% annually. Christie Ransom, president and CEO of the Winona Chamber of Commerce, explained the impact on small businesses.
“That did include a rate of escalation every year for inflation that used to cap at like 2.5%,” Ransom said. “Now it’s at 5%, so that they can have an annual rate of inflation of up to 5%.”
Minnesota’s minimum wage laws also differ from neighboring states like Wisconsin and Iowa, particularly in the restaurant sector.
“When you’re looking at other states that border us that have different minimum wages for their tipped employees, and Minnesota does not,” Ransom continued. “So, you’re paying them the true minimum wage, and then on top of that, their tipped wages.”
Some business owners anticipate an annual payroll increase of $30,000. At Kaddy’s Kafe, maintaining adequate staffing without reducing hours is crucial for customer satisfaction.
“It’s busier, and we probably have three or four hostesses, and my husband helps out without pay. There’s no way around it, because if you don’t have the staff, you’re not going to have the customers,” Kadlec said.
Ransom highlighted the uncertainty business owners face when hiring new employees and balancing part-time schedules with benefits eligibility.
“Do you have more part-timers? Do you try to keep them under the hours where they actually qualify for paid family medical leave because they have to work a certain amount of time to qualify for it?” Ransom said. “So, do you keep multiple employees under that amount of time and kind of protect yourself?”
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