Before the midterm elections, Michigan Governor Gretchen Whitmer broke with party talking points and expressed concerns that the court-mandated minimum wage hike to $12 per hour would be harmful to small businesses. New state-level analysis confirms this and potential future wage hikes could cost the state tens of thousands of jobs and millions in lost earnings.
In July, a Court of Claims judge ruled the state legislature’s adoption of a 2018 ballot measure raising the minimum wage and then amending it to ameliorate concerns about the aggressive timeline was unconstitutional. The decision was to reinstate the provisions of the original measure, backed by union-funded advocates such as One Fair Wage, which would raise the regular minimum wage to at least $12 per hour immediately, and eliminate the state’s tip credit. This provision would raise the tipped minimum wage roughly 200% in the span of just a few months.
The court then issued a stay on the implementation of this mandate until February 19, based on concerns over affected employers’ ability to adapt to the change. Now, the decision is being challenged in the Michigan Court of Appeals.
But this week even after winning reelection, Gov. Whitmer has not abandoned her concerns about the impacts of these rapid wage hikes on already struggling businesses. In fact, in an interview with the Detroit Free Press, she indicated support for legislation that slowed down the implementation of a $12 minimum wage and elimination of the tip credit.
Whitmer’s concerns are aligned with economic research on the impacts of such drastic wage hikes, and some economists have even estimated the losses Michigan would face under these successive measures.
In a paper published by the National Bureau of Economic Research, economists David Neumark and Peter Shirley find that a significant majority of studies conclude minimum wage hikes cause significant employment losses for affected workers. In another recent study, Neumark and colleague Maysen Yen find that a $1 raise in tipped minimum wages could cause up to 6.1% job loss and 5.6% earnings loss.
Building on this research, economists William Even and David Macpherson of Miami and Trinity Universities estimated the state-level impacts of these hikes for Michigan:
A regular $15 minimum wage could cost the state 30,119 restaurant jobs by 2027.
A $15 tipped minimum wage could cost an additional 13,449 restaurant jobs by 2027.
Raising both the standard and tipped minimum wages to $15 brings the total loss to 43,568 jobs by 2027.
Restaurant employees in Michigan could lose nearly $48.2 million in total annual earnings due to a $15 tipped minimum wage.
Eliminating the tip credit and raising state tipped minimum wages to $15 would cost the average family of a tipped restaurant worker in Michigan up to $1,109 dollars per year in annual income.
To read more about Even and Macpherson’s projections, view the full report here.