Michigan Minimum Wage Ballot Measure Goes Against “Econ 101”

Last Friday, the Michigan Supreme Court ruled against a One Fair Wage-backed ballot measure that would have raised Michigan’s minimum wage to $15 per hour, and eliminated the state’s tip credit.

The proposed measure originally stalled with the state’s Board of Canvassers after the petition’s language was changed from the originally filed language. Proponents pushed the Michigan Supreme Court to compel state election officials to qualify the measure for November’s election ballot. This was shot down by the Court last week. Now, this measure will not appear before voters come November.

There is another measure still awaiting a court ruling. In 2018, state legislators chose to adopt a similar proposed measure, and after hearing concerns from local business owners and employees on potential job losses and business closures, amended the proposal to set the current minimum wage law. As of now, Michigan’s minimum wage is set to rise to reach $12.05 per hour in several years, and continues to protect the state’s tip credit. One Fair Wage activists sued to reinstate the original $15 minimum wage, which was initially upheld in a lower court but reversed in the Michigan Court of Appeals. The Michigan Supreme Court is set to decide on this case, and has the chance to protect small businesses and their employees from the harmful consequences of a $15 minimum wage and full tip credit elimination.

In light of the recent news about this year’s ballot proposal and anticipating a decision on the 2018 law, EPI’s research director co-authored an op-ed in The Detroit News this week with Michigan-based Michael LaFaive, senior director of fiscal policy at the Mackinac Center for Public Policy. Paxton and LaFaive warn against the real consequences Michigan could face if it implements a $15 minimum wage and full tip credit elimination:

If voters had approved such a measure, it would have hiked the state’s minimum hourly pay each year until it reaches $15 in 2027. It would also, over a six-year period, raise the current “tipped wage” of $3.93 per hour until it matches the state minimum for all workers. That new wage would have subsequently been adjusted each year by the inflation rate faced by urban wage earners. In the previous 12 months that would represent a 3.5% increase.

Lansing lawmakers should not now take up the same cause. Minimum wage mandates make economic mischief.

The ballot question came before the state’s highest court after the State Board of Canvassers deadlocked on the certification vote because of a language inconsistency. The original initiative contained summary language that stated the amendment would apply to employers with one or more employees, while subsequent language put the number at 21.

Econ 101 tells us there is an inverse relationship between the price of nearly everything and the quantity demanded of it. Raise the price of cars or restaurant meals, and people will buy less of them. Raise the cost of hiring people, and employers will cut back on hiring. Many studies that look specifically at the minimum wage demonstrate that higher mandates lower demand for workers, typically the least skilled among us. A 2022 working paper posted at the National Bureau of Economic Research reviews the last three decades of minimum wage studies. The authors find 79% of the studies demonstrate overwhelmingly negative employment impacts from minimum wage mandates. The job loss effects were even “stronger for teens and young adults, and more so for the less educated.”

The failed initiative was more invasive than previous minimum wage increases. 

Read the full opinion at The Detroit News.