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What to know about Michigan's minimum wage hike

Alex Doty • Dec 4, 2015 at 9:00 AM

Some Michigan workers may see an increase in their take-home pay at the beginning of next year.

On Jan. 1, the state’s minimum wage increases to $8.50 per hour for hourly employees and $3.25 per hour for tipped hourly employees, ages 16 or older.

The increase is the second of a gradual 25 percent increase of the state minimum wage over the next several years, topping off at $9.25 per hour in 2018.

Here’s more of what you need to know about these changes:

(1) What’s the reaction from the business community?

Joy Gaasch, president of the local Chamber of Commerce, said that the reality for business owners is that wages are increasing.

“I think it’s basically a cost of doing business that everyone will have to factor in,” she said. “It’ll have a definite impact on small business, but at least we know it’s coming.”

Gaasch noted that there are potential ballot proposals on the horizon, including one that would require employers to offer a certain number of sick days.

Kelly Larson, owner of Sweet Temptations and Fortino’s, is one who’ll be impacted by the changes.

“Of course it is going to have some impact,” she said. “Most of our wages are minimum wage — at least the entry-level workers’ are.”

Larson employs about 80 people combined at all of her Tri-Cities store locations during the peak summer months, and 30 during the slower periods. About three-quarters of those, she noted, are high school and college students. 

“To be competitive and to get the talented kids, we do have to pay attention and see what’s out there,” Larson said. “We’ve been very lucky to get the kind of workers we’re looking for. It’s not as easy as it used to be.”

Larson said that because her peak employment time isn’t until well after Jan. 1, she’ll have time to figure things out for her business.

“We all want to get paid more, but where does it come from?” she posed.

Larson also noted that wage hikes are joined by other increases, such as the cost of supplies and materials for the products she makes — something that in the end results in higher prices.

“I’m very interested to see how it all affects us as consumers,” she added. 

(2) Why is there a gradual increase in Michigan’s minimum wage?

The increase is the result of a law signed by Gov. Rick Snyder on May 27, 2014. The Workforce Opportunity Wage Act (Public Act 138 of 2014) replaced the Michigan Minimum Wage and Overtime Act.

At the time of the law’s signing, Snyder said that the gradual increase was a compromise and responsibly raised the wage.

The 2014 act was a response to a planned ballot proposal from Raise Michigan that would have raised the state’s minimum wage to $8.10 in 2015, $9.10 in 2016 and $10.10 in 2017. Thereafter, it’d be indexed to inflation.

The Raise Michigan plan would have also increased tipped wages to $3.50 in 2015, and then increased the wage by 85 cents per year until it reached $10.10.

(3) What is the impact for younger workers?

The act allows an employer to pay a newly hired employee, age 16-19, $4.25 per hour for the first 90 days of employment as part of a “Youth Training Wage.” It also allows an employer to pay 85 percent of the minimum wage to employees ages 16-17.

The state notes that current Federal Minimum Wage is $7.25 per hour, so employers covered by both state and federal minimum wage laws are asked to pay attention and pay the higher applicable rate.

(4) What are the affects on tipped wages?

The law stipulates that tipped employees are to be paid 38 percent of the minimum hourly wage, provided reported tips received in a pay period, plus the tipped employee minimum hourly wage rate, equal or exceed the minimum hourly wage rate. Shortfalls must be paid by the employer.

Employees are required to sign a written tip statement before the date their paychecks are received, and the list must be maintained by their employer — for each pay period tips are reported.

(5) Are there any changes to minimum wage beyond 2018?

There are also those who believe we may avoid future minimum wage battles since the compromise includes future increases indexed to the rate of inflation.

Beginning in January 2019, the state treasurer must adjust the minimum wage annually based on the average annual percentage change in the Consumer Price Index for the most recent five-year period for which data is available, capped at 3.5 percent.

The Department of Licensing and Regulatory Affairs then must post the adjusted rate on its website by Feb. 1 of the year it is calculated, and the rate goes into effect on April 1. 

There are exceptions, however, and an inflation-based increase won’t go into effect if the unemployment rate for the state exceeds 8.5 percent at any time during the preceding year.

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“I’m very interested to see how it all affects us as consumers.” — local businesswoman Kelly Larson

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