Michigan minimum-wage workers got a raise on Jan. 1. But they won’t see $12/hour until 2030.

Legislature has history of holding back increases

People gather together to ask the McDonald’s corporation to raise workers wages to a $15 minimum wage as well as demanding the right to a union on May 23, 2019 | Joe Raedle/Getty Images

Michigan started the new year by joining 21 states in raising the minimum wage But workers saw a smaller increase than they would have if a 2018 citizen-led ballot initiative was still on the books.

As of Jan. 1, minimum wage workers in Michigan will make $9.65 an hour, which is a 20-cent pay increase from 2019. Employees who are tipped will also see an increase in their hourly pay from $3.59 to $3.67 an hour.

These increases are much lower than what was proposed under the original minimum wage ballot initiative, led by the Michigan One Fair Wage coalition. And this wasn’t the first time the Legislature acted to scale back a minimum-wage hike. 

Under the 2018 measure, the hourly wage would have risen to $12 by 2022, and included an increase based on inflation rates after 2022. The separate tipped wage would have been phased out by 2024 and then would rise to the same level as that for other workers. There also was a proposal to mandate sick leave for workers.

State minimum wage rates | Economic Policy Institute chart

However, instead of letting the proposals go to the ballot in November, the Legislature adopted them in September 2018. In the Lame Duck session, lawmakers passed new watered-down versions that were signed by then-Gov. Rick Snyder. The Michigan Supreme Court last month declined to give an opinion on the GOP “adopt and amend” maneuver. 

Now, minimum wage workers can’t expect to see an hourly wage of $12.05 until 2030. 

Mark Brewer, a former Michigan Democratic Party chair who was the attorney who represented One Fair Wage, says that once you account for inflation, that $12 minimum wage in 2030 will have less value than our current minimum wage. 

“It’s just too long of a period to get from where we are now at $9.65 to $12,” Brewer said. “Inflation is going to take over whatever the increase is.”

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Peter Ruark, Lansing-based Michigan League for Public Policy senior policy analyst, says the Legislature’s adopt-and-amend tactic was “brazen and shameless.”

“People lose faith in their government when they see things like what happened in Lame Duck of 2018,” Ruark said.  “A lot of people were very enthusiastic about both the minimum wage ballot proposal and the paid sick time proposal, and then they saw the Legislature take that away, pass it and then gut it. That doesn’t restore people’s faith in their legislators to do the right thing.”

The largest organization in opposition to the minimum wage increase, especially phasing out the subminimum wage, was the Michigan Restaurant Association (MRA), a state-level subsidiary of the National Restaurant Association that’s the largest trade association and lobbying group in the industry. 

The MRA claimed the 2018 initiative would increase labor costs by 241% and could have a detrimental effect on the number of restaurant jobs in Michigan. 

This organization fought and won a similar battle in 2014 when another citizen-led initiative was brought forth to raise the minimum wage for tipped employees.

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History of slowing minimum wage increases

The Legislature’s attempts to suppress a minimum wage bump in 2018 wasn’t the first time a citizen-led initiative for the issue was altered.

In 2006, the GOP-controlled Michigan Legislature acted to raise the minimum wage before a more extensive initiative made it on the ballot. The ballot initiative proposed to raise the minimum wage from $5.15 to $7.15 an hour over three increments and would adjust to the inflation rate annually thereafter. 

Instead, the Legislature passed an even higher increase to the minimum wage proposed — first raising it to $6.95 on Oct. 1, 2006 — but opted out on the yearly increases linked to inflation rates. 

In 2014, another initiative was brought forward to amend the Minimum Wage Act of 1964. The ballot initiative proposed to raise the minimum hourly wages for non-tipped employees, phase out the subminimum wage for tipped employees and annually adjust the minimum wage based on the change in cost of living. 

However, by proposing this legislation as an amendment to an already existing law, it left a way for lawmakers to put a stop to these efforts. 

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The GOP-led Legislature in 2014 passed a separate bill that repealed the 1964 law, which made the proposed initiative irrelevant even if it was passed by voters. The new legislation increased the minimum wage, but did not work toward one equal minimum wage for all workers.

Danielle Atkinson, the executive director and founder of Mothering Justice, a Michigan advocacy group for mothers, has been a leader in the Michigan minimum wage fight for years. 

“We had a laser focus on people’s individual economic stability as a main indicator of a successful economy and, obviously, that is not the language or the conversation that we feel has been going on, which largely focuses on businesses and small businesses as an indicator,” Atkinson said. “People in Michigan were really struggling and hadn’t received a raise for over six years [in 2014].”

Despite the end result falling short of the 2018 proposal, Atkinson said proponents of One Fair Wage still consider it a victory. 

“We will take the small victory that we won for the people of Michigan, but we won’t stop fighting,” she said. “The system is rigged and it’s unfair that a citizen initiated process can be hijacked by the party in opposition.”

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Living off tips 

Some Michiganders in every city are legally making less than the state’s standard minimum wage from their employers, which comes to less than $4 an hour before tips. 

If a tipped employee earns enough in wages and tips to equal more than the state’s minimum wage an hour, the employee gets to keep it all. If the amount of tips, in addition to the hourly wage, is less than $9.65 an hour, the employer must make up the difference.

But Ruark says this system relieves employers of their responsibility to fully pay their employees. 

By having a substandard tipped minimum wage, we’re having customers subsidize part of the wages that employers should be paying,” Ruark said. 

State minimum wage rates for tipped employees | Economic Policy Institute chart

Alicia Renee Farris, the senior national deputy director for Restaurant Opportunities Center United (ROC), a national organization representing restaurant employees, says that tips should be seen as bonuses.

“The Michigan Restaurant Association, National Restaurant Association and others, try to confuse workers. What we’re really doing is saying workers deserve the full minimum wage, whatever that is for the state, plus tips on top,” Farris said. “We’re not trying to take away tips. We see tips as being bonuses for service, but still believe that you should have a living wage. People should not have to rely on the generosity of others to make their bills.”

Eight states have done away with the subminimum wage system altogether, and offer one minimum wage for all employees. Those states include Washington, Oregon, California, Nevada, Montana, Minnesota, Alaska and Hawaii. 

According to the Washington, D.C.-based Economic Policy institute (EPI), the poverty rate for tipped workers making less than minimum wage is almost double that of non-tipped workers. Employees working for tips also are less likely to receive benefits, like paid leave, health care or retirement plans, making them more likely to turn to public assistance options.

In Michigan, 15.6% of tipped workers receive food stamps and 21.8% of tipped workers are supported by Medicaid, according to data from the ROC united analysis of census data.

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The data also show that women make up 78% of tipped workers in Michigan and are more susceptible to sexual harassment in the workplace. 

The subminimum wage means workers must depend on gratuities as their primary source of income, forcing them to tolerate harassment to safeguard their livelihood,” according to the ROC.

How does Michigan compare nationally?

The minimum wage has gone up in 22 states at the start of 2020, adding 15 states with wage floors of at least $10 or more by the end of this year, according to the Economic Policy Institute.

The average minimum-wage job now pays almost $12 an hour, per EPI, and the highest state minimum wage, as of Jan. 1, is $13.50 in Oregon.

The federal minimum wage hasn’t seen an increase since 2009, when it was raised to $7.25 from $6.55 an hour. A number of Democratic candidates running for president are pushing to raise the federal minimum wage, some even as high as $15 an hour. The Democratic-led U.S. House last year passed legislation setting the minimum wage at $15 per hour, but the GOP-led U.S. Senate hasn’t taken action.

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In the Midwest, Michigan has the second-highest minimum wage. On Jan. 1, Ohio raised the minimum wage to $8.70, Illinois went to $9.25 and Minnesota increased the minimum wage to $10 for large employers and $8.15 for small employers.

Indiana and Wisconsin, which both have wage floors of $7.25 — the federal minimum — did not make any changes for 2020. 

But some states offer alternatives to make the minimum wage more affordable in cities with higher costs of living, like Chicago.

Illinois has a relatively low state minimum wage, but sets a higher minimum wage for employees working in Chicago — $13 an hour. This makes affording the cost of living in the metro area much more possible for minimum-wage workers. 

Under current state law, this isn’t possible in Michigan. 

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In 2015, Michigan passed a local wage preemption bill that limited local governments’ powers from adopting labor ordinances, such setting local wage floors.

“Local labor laws often serve as very good experiments for state policy. I like to refer to localities as working labs for good state policy, ” Ruark said. “If a locality, such as Ann Arbor, Kalamazoo or Lansing, were to pass a higher minimum wage, after a few years we could show that, for example, there wasn’t a significant job loss and in fact, perhaps, there was job gain following the minimum wage increase.”

Although it may be a while before Michigan employees see a substantially higher minimum wage, the fight to get there remains strong. 

“Voters in more than one poll said that they overwhelmingly supported [One Fair Wage] and it would have passed. I think that says a lot,” Ruark said. “The people of Michigan want to see minimum wage workers and their restaurant servers compensated adequately for their work. We believe that hard work should be rewarded and this is one way to demonstrate that.” 

Advance reporter Nick Manes contributed to this story.