Michigan's New Wage

On May 27, 2014, Governor Rick Snyder approved legislation providing for a 25% minimum wage increase over the course of 4 years.  Starting in September, all Michigan businesses must begin paying employees $8.15/hour (previous wage was $7.40/hour) with annual increments until 2018, once the state’s minimum wage reaches $9.25. 

These wage changes may cause alarm for some, particularly to business owners. 

According to economists at UC-Berkley, who have studied 9 cities and 21 states with wages that exceed the federal minimum wage, raising wages does not have a drastic, negative impact on employment.  Their studies discovered that businesses absorbed the costs through lower turnover, small price increases at restaurants (which have a high-concentration of low-wage workers), and higher work productivity. 

Understandably, price increases at restaurants were cited as a negative effect of a wage increase.  When cities or states increased their minimum wage by 25% (like Michigan) – the cost of eating out increased by 2 to 3 percent.  Other negative effects, included a reduced number of entry-level positions in favor for more skilled positions and reduced hours for young and less-skilled workers. 

Only time will tell how Michigan will be affected by the minimum wage increase, but the future looks promising.