Just as the New Year ushered in a historic number of state and local minimum wage increases, union and progressive activists are pushing to raise the stakes even further.
Just as California became the state with the highest minimum wage in the country on January 1, raising its wage to $15 per hour, activists weren’t satisfied, and filed a ballot measure to push the target up to $18 per hour, for voters to potentially decide upon this November. Now in Michigan, despite being on track to raise its minimum wage every year through 2030, activists want more.
In 2018, wage hike advocates advanced a ballot measure to raise the state’s minimum wage to $12 per hour in 2022 and increase every year after with inflation. In Michigan, the process allows the state legislature to consider ballot measure proposals and enact them before they reach the ballot.
As such, the state legislature approved the $12 minimum wage measure in September 2018, but later amended it to spread out the increases over a longer period – to reach $12.05 per hour by 2030. Now, that target date is 2031, since the planned 2021 increase was delayed a year when Michigan’s unemployment rate tallied higher than 8.5 percent.
While the amendment to the original September 2018 initiative was controversial, state legislators cited the adverse effects a steep wage increase would cause for Michigan’s businesses and their employees. They were indeed correct – an overwhelming majority of minimum wage research has shown that minimum wage hikes kill jobs.
The enacted measure put Michigan on an annual schedule to raise its minimum wage every year through 2031. But left-wing activists including the Restaurant Opportunities Center’s anti-tipping nonprofit One Fair Wage have launched a ballot campaign to raise Michigan’s minimum wage to $15 per hour before the current schedule is even complete.
As was the case back in 2018, a steep wage increase of this kind has been projected to kill Michigan jobs. A study by Drs. William Even and David Macpherson from Miami and Trinity Universities determined the $15 per hour federal minimum wage proposed in 2021 would cost the state nearly 60,000 jobs.
The proposal also would also eliminate the state’s tip credit, raising the minimum wage for restaurant employees who earn substantial tips up to $15 per hour from $3.75 this year (a 300% increase). This would be particularly harmful for Michigan’s tipped restaurant employees. Research by economists at the University of California-Irvine find a nearly proportional decrease in full-service restaurant employment for every 1% increase in the tipped minimum wage. Another study from Even and Macpherson finds areas with severely reduced or eliminated tip credits employ 18% fewer tipped employees in full-service restaurants than areas that still maintain tip credits to account for restaurant employees’ significant tip income. This outcome would hold true for Michigan: Even and Macpherson’s impact analysis of a $15 minimum wage on the state indicates 1 in 3 lost jobs as a result would be for tipped employees.
If they don’t lose their jobs, research shows restaurant employees’ income is likely to decrease as a result of eliminating the tip credit. When restaurants are faced with an increased wage bill due to steep wage mandates, many have switched to a flat service charge or menu price increase model to cover new costs. To alleviate customers’ sensitivity to their increasing dining bill, many owners end tipping in their restaurants. As a result, raising the tipped minimum wage and eliminating the tip credit cuts into tips and overall earnings for restaurant employees. In fact, analysis by the U.S. Census Bureau found a 5-6% increase in the tipped minimum wage caused a similar decrease in tip income when comparing states with varying tipped wage mandates.
A severe wage hike coupled with eliminating the tip credit would cost tens of thousands of Michigan employees their jobs and earnings, especially in the already embattled restaurant industry. State lawmakers listened to the concerns of affected businesses and their employees in 2018 – and should be wary of this new proposal to put progressive politics ahead of workers’ livelihoods.