On Jan. 1, Michigan’s minimum wage increased from $9.45 per hour to $9.65 per hour. Tipped workers’ minimum wage increased from $3.59 to $3.67. This is part of the gradual increase set in Public Act 337 of 2018, also known as the Improved Workforce Opportunity Wage Act. The next increase is in January 2021 to $9.87 and $3.75 (tipped workers), according to the Michigan Department of Licensing and Regulatory Affairs (LARA).
The federal minimum wage is $7.25 an hour. About half of U.S. states have higher than federal minimum wage, and Michigan sits near the middle in regards to hourly pay. Some states have lower minimum wage than the federal amount. Alabama, Louisiana, Mississippi, South Carolina and Tennessee have no minimum wage laws. Wyoming’s minimum wage is $5.15. According to the U.S. Department of Labor (DOL), workers receive the higher of the two. According to the DOL, tipped workers report making less than non-tipped workers.
While this increase is good news for minimum wage workers, just 2.7 percent of hourly workers made the federal minimum wage or less, according to the Bureau of Labor Statistics in 2016.
Chris Douglas, University of Michigan-Flint associate professor of economics, said this increase will only impact a small amount of the working population, if the goal in fact, is to help those on the poverty line.
Some businesses pay higher than state wage due to the market. According to salary.com, the median fast food worker in Michigan makes $11.47 an hour or $22,020 annually in late 2019.
Whenever there is an increase, there are concerns about minimum wage depressing hiring or leading to the automation of jobs, Douglas said. In short, it could have a negative unintended consequence of lowering employment for people in this job market. While a controversial viewpoint, he said some economists don’t agree with this. Douglas said that because the economy is strong, and that the increase is gradual at about $.22 per year, it’s unlikely to have such a negative impact.
If the increase was more dramatic in a weak economy, such as quickly increasing to $12 or $15 an hour, it could hurt the profit margins enough for a business to increase prices or automate jobs.
Douglas said the goal for a wage increase is to increase the pay for those closest to the poverty line. A single, childless adult making $12,490 annually is making poverty wages according to the 2019 U.S. Federal Poverty Guidelines. This translates to about $6.50 per hour for a 40-hour week. Douglas believes that minimum wage increases are a “blunt instrument” for helping those close to poverty.