Michigan’s government-mandated minimum wage could soon rise by 30%, from $10.10 per hour to $13.03 per hour, depending on a ruling from the state Supreme Court. Unfortunately, there is no “free lunch” in this world, so the increase in pay for some workers would mean others lose their jobs while consumers pay more in prices.
Bridge Michigan quotes a server who worries that the higher mandated hike, combined with some other changes to tipped workers, would “prompt layoffs, fewer tips and more work.” Allison Rybsky is a server at Driftwood Bar and Grill in Novi.
“As much as I would like to make more money an hour, I don’t think in the long run it’s going to work,” Rybsky says. “There are nights where I come in here for four or five hours, and I make $500.”
Mexican restaurant owner Roberto Ortega tells Bridge the mandated hike means he would “have to charge a ridiculous price for any single item” and that overall tips would decrease as a result. Servers at his restaurant already make $20-$25 per hour with tips.
A hike in the minimum wage doesn’t mean the end of restaurants, though some would close. But the consensus of the research from economists is that minimum wage hikes are bad for workers and consumers overall.
St. Paul, Minnesota increased its minimum wage by almost 30% from 2017 to 2021. A report from the Minneapolis Federal Reserve Bank found a slight increase in hourly wages but a larger drop in the number of jobs and hours, worked which added up to an overall decline in wages. This was especially concentrated in lower-paying businesses for lower-paid workers.
A report from the Harvard Business Review looked at worker schedules and wage data from similar stores in California (which hiked the minimum wage) and Texas (which did not) from 2015 to 2018. This study found that every $1 increase in the minimum wage resulted in workers working 20.8% fewer hours per week. This cut the total compensation for the average minimum wage worker in California by 13.6%.
If you travel around Michigan, you’ll frequently see businesses advertising for workers at $13, $14, $15, $22 or more per hour. This isn’t because the government is mandating it – those wages are above the current minimum wage requirement – but rather because of good ol’ supply and demand. The government mandating higher wages benefits some people at the expense of others and is counterproductive for helping most workers.
The demand for labor drives wage growth, and this applies to the lowest-wage jobs. But enough politicians have fooled themselves that they can mandate higher wages. Increasing the minimum wage tends to hurt the very people they say they’re trying to help.
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