Michigan's Minimum Wage History
Job Killing Proposal to Increase Michigan’s Minimum Wage
& Eliminate the Tip Credit
“Make no mistake, this government mandated wage hike that completely eliminates the tipped minimum wage will not only increase menu prices and cost Michigan jobs – it will put many restaurants out of business.” – Michigan Restaurant Association President & CEO Brian DeBano
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In February, a coalition formed to raise the minimum wage in Michigan filed their petition language with the Secretary of State. The petition not only raises the minimum wage to $10.10 over the next three years, it completely eliminates the tip credit in Michigan and then indexes that wage to inflation going forward. They now have until May 28 to collect 258,088 signatures in order for the petition to appear on the November ballot.
Under their proposal, the minimum wage would be raised from the current $7.40 to $8.10 in January 2015, to $9.10 in January 2016, and to $10.10 in January 2017. Then, starting in 2018, it would be indexed to the rate of inflation every year.
The tip credit language is more complicated. It would increase the tipped minimum wage from the current $2.65 by 85 cents each year until it has caught up with the minimum wage, at which point the tip credit would be permanently eliminated.
The Michigan Restaurant Association takes this threat very seriously. Keep in mind proposals to raise the minimum wage tend to be “populist” in nature and extremely difficult and expensive to defeat on the ballot.
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Who’s Behind It?
The proposal is being pushed by a coalition of labor and civil rights groups known as Raise Michigan. It is led by Oakland County Democratic Party Chairman and ROC-Michigan Director Frank Houston and involves several southeast Michigan organizing entities, including the Restaurant Opportunities Center of Michigan. While financial reporting was not yet available, early reports indicate that the committee will receive financial backing from several labor unions throughout the state.
National Trend
Michigan isn’t alone when it comes to interest in raising the minimum wage. Ten states raised their minimum wage in 2013 and another 13 are projected to do so in 2014. In total, 36 states either have pending legislation to raise their minimum wage or are facing organized efforts to do so through ballot initiatives.
There does seem to be initial support from the general public about raising minimum wage. A recent nationwide poll showed an astounding 71 percent in support of a generic (non-specific) proposal to raise the minimum wage. A November 2013 poll conducted statewide in Michigan showed 58 percent in support of raising the minimum wage to $10 per hour.
Tipped Minimum Wage Under Attack
The language filed by Raise Michigan includes the eventual elimination of the tip credit. If this were to happen, it would make Michigan one of only eight states in the country, and the only one east of the Mississippi River, that doesn’t have a separate tipped minimum wage.
While not well-known to the average voter, any full-service restaurateur can tell you how important the tip credit is to their bottom line. Most states, including Michigan, allow for a lower tipped minimum wage for those employees directly and regularly receiving tips. Nationally, that rate is $2.13 as opposed to the federal minimum wage of $7.25. In Michigan, it is $2.65 instead of $7.40. Given the low profit margins and high overhead of the restaurant industry, the tip credit is the only thing keeping many small restaurants in business.
Even President Obama hasn’t gone as far as proposing the elimination of the tip credit. His proposal, referenced during the State of the Union address in February, pegs the tipped minimum wage at 70 percent of the full minimum wage.
What’s Next
Raise Michigan received “approval as to form” of their petition by the State Board of Canvassers in mid-February. Keep in mind they were not allowed to look at the content of the proposal, only whether it meets the form requirements outlined in the law.
Raise Michigan now has until May 28 to collect 258,088 valid signatures in support of their petition. If they are successful, the signatures are then certified by the Board of Canvassers. After being certified the proposal then goes to the Michigan legislature. The legislature then has 40 session days to approve or disapprove the proposal – they are not allowed to amend it in any way. It becomes law if the legislature approves it. If they don’t approve it, it would then go before voters in the November election.
How You Can Help
You can join the MRA in continuing to communicate, both by word of mouth and by writing letters to the editor, the importance of the restaurant industry to Michigan’s economy. Some key messages to include are:
- The restaurant industry is an engine of economic growth in Michigan and throughout the country and employs 10 percent of the entire labor force.
- The restaurant industry is unmatched in terms of the opportunity and upward mobility potential for its employees.
- The restaurant industry operates with razor-thin profit margins and high overhead costs which make it especially vulnerable to wage mandates.
- A mandated increase to the minimum wage and eliminating the tipped minimum wage would unequivocally shutter restaurants, cost jobs and slow overall growth in Michigan. It is the wrong policy at the wrong time.
- The restaurant industry is proud of its unassailable reputation as an industry of opportunity and upward mobility.
- 1 in 3 Americans started their career in the restaurant industry. It is the training ground for millions of entry level workers who have built critical competencies of personal responsibility, teamwork, and accountability. Access to these critical opportunities is at risk with an increase to the minimum wage.
- An amazing 80 percent of restaurant owners said their first job in the industry was an entry-level position. The restaurant industry is unmatched in its level of upward mobility.
- If the proposal is enacted, Michigan would become the ONLY state east of the Mississippi River to eliminate the tipped minimum wage and only the 8th state nationally to do so.
- Currently, all tipped employees make at least the full minimum wage, combining the $2.65 employer provided cash wage per hour plus any tips the individual receives. If an employee ever receives less than the full minimum wage including tips, the employer is required by law to provide the difference themselves.
- Most tipped employees make substantially more than the minimum wage. The median hourly wage of tipped employees is $16 per hour.
- Restaurants exist on a razor-thin profit margin of five percent before taxes. Eliminating the tipped minimum wage will dramatically increase their overhead and unequivocally cause some restaurants to shutter their doors.
- The restaurant industry is committed to be an engine of growth and job creation for America’s economy, but mandates like these are hurting “mom and pop” restaurants.
- The Congressional Budget Office announced last week that the Affordable Care Act will lead to the equivalent of 2 million fewer full-time workers in the labor force in 2017. Coupling that with a minimum wage will hike will cost more jobs.
- More than 7 out of 10 eating and drinking establishments are single-unit “mom and pop” operations.
- It is critical to understand that the minimum wage is a starting wage and rarely received by either full-time employees or those acting as head of the household.
- Forty-six percent of federal minimum wage restaurant workers are teenagers, while 70 percent are under the age of 25.
- The average household income of restaurant workers who earn the federal minimum wage is $62,507.
- A wage mandate like that pursued by Raise Michigan would increase menu prices and cost jobs.
- After the 2007 federal minimum wage increase, 58 percent of restaurant owners increased menu prices.
- Forty-one percent reduced total employees’ hours to offset the wage increase and 24 percent actually laid-off employees to compensate for the wage increase.