Add it up
The economics of the 2024 legislative session.
Following last year’s spending spree and tax money giveaways, there wasn’t much in the legislative tills to spend at the Capitol this year. And with DFL-majority lawmakers railroading through their culturally progressive policymaking in the last session, this year’s relative quiet session was to be expected. Still, lawmakers passed numerous bills that could have significant consequences for Minnesota’s economy, businesses, and individuals.
A few notable bills passed, such as a fix to the School Resource Officer law (SRO), changes to Paid Family and Medical Leave, a ban on straw gun purchases, changes to the marijuana law, a ban on “banning” books, and clean transportation standards.
Here’s a look at some of the other bills that were passed in the session and what they might mean for Minnesotans.
Minimum wage for Uber and Lyft
Effective December 1, Uber and Lyft drivers all over Minnesota must be paid at least $1.28 a mile and $0.31 per minute, which equates to a 20 percent raise. Tips do not count as part of the minimum wage. To the extent that drivers do not make minimum wage in a pay period, Uber must make up the difference.
Additionally, the bill contains some insurance provisions for drivers. Specifically, ridesharing companies must carry insurance that compensates drivers for loss of income due to personal injury and pays for medical as well as funeral and burial expenses.
It’s important to note that the rideshare bill’s provisions will likely increase rideshare costs in Minnesota. Furthermore, as the bill supersedes Minneapolis’ higher wage, it could potentially limit local control.
‘Taylor Swift’ bill
Largely inspired by what happened with Taylor Swift’s Eras tour, whereby resale tickets were going for tens of thousands of dollars, the bill cracks down on “hidden costs” by requiring ticket sellers to display the full cost of the ticket, including any fees, to customers upfront.
In addition, ticket resellers must disclose to customers that they are resellers. They are also prohibited from ticket scalping — or buying tickets for the sole purpose of selling them later.
Likely impact: What’s potentially problematic about this bill isn’t what it does, but what it does not do. Websites such as Ticketmaster already disclose fees and surcharges before checkout. The bill merely changes how that is done. Many of the issues that this bill addresses (such as resellers infringing on copyrights) are, for the most part, already addressed by other laws, such as copy and trademark laws.
The passage of this bill prompts the question: Should our legislators be concerned about people buying Taylor Swift concert tickets for $10,000? The motivation behind the law is highly illogical. Tickets were sold out because demand outweighed supply, and no legislation could change that.
To the extent that this bill curbs any exploitation of ticket sales, it will do so by adding many layers of heavy-handed bureaucracy on ticket sellers, resellers, and even consumers, who are tasked with reading all these required disclosures.
Ban on junk fees
Like the Taylor Swift bill, this also deals with price transparency. Specifically, the law requires sellers to disclose mandatory fees upfront. Here, mandatory fees are defined as a fee or surcharge that:
(1) must be paid in order to purchase the goods or services being advertised;
(2) is not reasonably avoidable by the consumer; or
(3) a reasonable person would expect to be included in the purchase of the goods or services being advertised.
Unsurprisingly, government fees — including taxes — are not included in the list of mandatory fees, so sellers are not required to fully disclose them.
Likely impact: Like the bill taking on Ticketmaster, this bill also solves a largely nonexistent or small problem. Some fees, such as credit card fees, are not mandatory. Instead, they are imposed for things such as late payments, cash advances, or balance transfers. The same is true for baggage fees and overdraft fees for bank accounts.
Fees for online purchases, such as ticket purchases, hotel bookings, and other online delivery orders, which Lt. Gov. Peggy Flanagan specifically called out, are usually disclosed before checkout. The same is true for in-store purchases, such as restaurants.
In the May 21, 2024 article, “What Minnesota’s new ‘junk fees’ law means for purchases — and tipping at restaurants,” the Star Tribune reports, “Hospitality Minnesota, which represents roughly 2,000 businesses, said restaurants ‘are already required to disclose fees on the menus and receipts with specific guidelines on font size and style.’”
Businesses — especially those that rely on repeat customers — generally have an incentive to disclose prices. In the Twin Cities, some restaurants have already ditched service fees due to negative customer feedback. So, this issue is something that the market can resolve without government intervention. To the extent that the bill curbs truly deceptive pricing, it will do so at a high cost by imposing a massive bureaucracy on all businesses.
Let’s also keep in mind that restaurants and other service industry establishments have these service charges mostly due to rising costs. The fees are likely not going away but will be incorporated into prices, possibly reducing the transparency that comes with an itemized receipt.
Eliminating fees would raise prices across the board for businesses where customers can unbundle services, making customers worse off. Similarly, for services where early termination fees are present (such as with internet and cable television subscriptions), eliminating such fees would push all costs upfront, raising costs for customers.
So, contrary to Gov. Tim Walz’s claim that “This bill is going to protect Minnesotans’ bottom line, provide clarity for consumers, and ensure companies aren’t using deceptive practices to rip their customers off,” this bill won’t save Minnesotans money. Businesses, however, will have one more rule to comply with, and consumers might even experience some unintended consequences.
Health insurance coverage for wigs
S.F. 4423 requires health insurance to cover the cost of wigs for cancer patients up to $1,000.
Likely impact: Health insurance costs might go up to compensate for extra costs.
Health insurance coverage for abortions
The Star Tribune reported on May 23, 2024, “What was in the Minnesota Legislature’s 1,400-page-plus ‘omnibus prime’ bill?”:
Health plans operating in Minnesota must provide coverage for abortions and related services starting Jan. 1, 2025. The bill states that health plans must not impose co-pays, coinsurance or deductibles for abortion services that are higher than the cost-sharing they apply to similar services. And a health plan cannot impose any special limitations on the coverage, such as prior authorization or referral requirements.
Likely impact: As with mandating coverage for wigs, this requirement might also raise health insurance costs. Some of that cost, however, will be eaten up by taxpayers, since “Minnesota will reimburse health plans for the coverage if they weren’t providing it before this new requirement was enacted.”
Minimum wage hike for young workers and small businesses
Currently, Minnesota law imposes different minimum wages for large and small employers. Large employers — businesses whose revenue exceeds $500,000 — must pay at least $10.85 an hour. Small businesses — businesses whose revenue is under $500,000 — must pay at least $8.85 an hour. Employers (of all sizes) can also pay workers $8.85 an hour if those workers are under 18 or are under 20 years old and undergoing a 90-day training period. Businesses in the hospitality industry are also allowed a lower minimum wage.
S.F. 3852, passed in the 2024 legislative session, repealed this law. Beginning Jan. 1, 2025, all Minnesota businesses (big and small) must pay at least $10.85 per hour, even if they are employing young people under 18 or are in training. The bill also raises the cap at which the minimum wage can rise from 2.5 percent to five percent.
Likely impact: Labor costs will rise for small businesses. This will result in either higher prices or job cuts. Similarly, a higher minimum wage for young workers and workers in training will result in lower employment for the targeted demographic, as American Experiment economists have shown.
Salary ranges in job postings
Also in S.F. 3825 and taking effect Jan. 1, 2025:
An employer must disclose in each posting for each job opening with the employer the starting salary range, and a general description of all of the benefits and other compensation, including but not limited to any health or retirement benefits, to be offered to a hired job applicant.
Likely impact: While the law would potentially increase the number of companies that disclose pay ranges on job postings, there is no evidence that government legislation is the only solution to this problem. During the tight labor market of 2019, for example, there was an increase in the share of companies disclosing pay ranges in job postings.
Complying with this mandate will likely be costly for employers. But whether the intended benefit is worth the cost is up for discussion.
Tenant bill of rights
S.F. 3492 modifies bills passed last year but also includes new bills intended to give more protection to renters. Among other things, the bill:
1. Establishes protections for tenants who decide to create a tenant’s association. Landlords cannot retaliate against renters for organizing. If they do, they face penalties.
2. Requires landlords to accept an Individual Taxpayer Identification Number (ITIN) in lieu of a Social Security Number. Landlords cannot deny rental applications solely because an applicant provides an ITIN.
3. Requires that landlords “may not require a tenant to renew a lease sooner than six months before the expiration of the current lease.” This is a modification from last year.
4. Landlords must accommodate tenants if units are not available by the move-in date due to construction delays or other things. Landlords must provide similar alternative housing or terminate the lease and refund the applicant for any fees.
5. Requires that landlords must not hold tenants liable for abandoning a rental unit before they make efforts to rent out the apartment.
Likely impact: While well-intentioned, the bills contained in this section do place a heavier burden on landlords for issues that the market could easily mitigate. This will make it harder and costlier for landlords to operate.
Ban on shadow non-competes
Last year, lawmakers passed a law banning non-compete agreements. This year, they passed another bill banning shadow non-competes.
The law now states, “No service provider may restrict, restrain, or prohibit in any way a customer from directly or indirectly soliciting or hiring an employee of a service provider.”
Likely impact: To the extent that non-competes may encourage business investment in human capital as some research has suggested — such as at the University of Chicago School of Law — blanket bans (including on shadow non-competes) would discourage such investments in human capital. In the long run, this would be detrimental to both businesses and workers.
Higher penalty for misclassifying workers
Employers who knowingly classify employees as independent contractors face a $10,000 penalty for each misclassified person and $10,000 for each violation.
Likely impact: While well-intentioned, the tests used to classify workers in some industries, such as construction, have become more complex. This means that companies will have to jump through more hoops to comply with new tests, which could be costly. Independent contractors also have more rules to comply with, which also makes it costly and harder for them to operate.
Overall, the increased regulation will dampen the flexibility that comes with independent contracting, which in turn limits the freedom available to businesses and employees in the Minnesota labor market.
Sick and safe time leave — record-keeping
Like the Paid Family and Medical Leave bill, the Earned Sick and Safe Time bill also needed to be revisited in this session.
In new additions to the law passed last year, employers will be required to give employees the current amount of earned sick and safe time hours available as well as hours that have been used during the pay period. Employers must keep these records for three years.
Likely impact: Employers will face higher costs due to the new record-keeping and reporting requirements.
Packaging Waste and Cost Reduction Act
Under the new law, producers — which include manufacturers, importers, publishers, brand owners, and distributors of packaging material — will be responsible for the cost of recycling packaging waste. Additionally, the bill sets targets for Minnesota to reduce waste through reuse, recycling, and composting.
By 2033, for example, the bill requires:
1. No less than 65 percent of eligible packaging waste is recycled or composted.
2. At least 10 percent of eligible packaging materials are reused, with producers collecting back at least 90 percent of materials.
3. The weight of packaging materials sold in Minnesota is 15 percent less than the levels identified during the initial assessment. A designated Producer Responsibility Organization (PRO) will do an initial assessment after the bill passes.
4. Eligible packaging material must contain at least 10 percent post-consumer recycled content.
Likely impact: Businesses that sell packaging will likely face rising costs, which might be passed on to consumers. Worse yet, there are no cost estimates for this bill because the program has not yet been structured. Consumers and businesses will have to find out after the bill goes into effect just how much compliance will cost.
Interstate compacts for some health care workers
On a positive note, lawmakers passed a law creating interstate compacts for some health care workers. These include:
- Physician assistants
- Occupational therapists and occupational therapist assistants
- Physical therapists and physical therapist assistants
- Licensed professional counselors
- Dentists and dental hygienists
- Social workers
Likely impact: Workers in these professions will easily get licenses and may practice in any member state as long as the license in their home state is in good standing. This will likely improve the mobility of health care workers. In turn, Minnesotans could see improved access to health care services.