GRAND RAPIDS, Mich. (WOOD) — If minimum wage increases go into effect in February, it would be “devastating” for businesses, the Michigan Restaurant and Lodging Association says.
News 8 reported Wednesday that Gov. Gretchen Whitmer wants to delay the looming increase to Michigan’s minimum wage, fearing it won’t be sustainable for businesses. Instead, she wants to work with the Legislature on a plan to phase in the wage increase.
The minimum wage is supposed to jump from $9.87 to $10.10 per hour in January. In February, it would jump again to $12 per hour. It’s set to increase each year with inflation after that.
Back in 2018, advocates tried raising the minimum wage to $12 by 2022 by putting it on the ballot. But Republican lawmakers prevented that from happening by jumping in and changing the law so the increase wouldn’t happen until 2030. Over the summer, a Michigan Court of Claims judge ruled that move unconstitutional. The judge ordered businesses to raise the minimum wage to $12 but agreed that order won’t take effect until February because the case is under appeal.
Justin Winslow, the president of the Michigan Restaurant and Lodging Association, told News 8 while upping the minimum wage to $12 would be “very quick,” the market has already seen wages rise quickly over the last two years.
His main concern is the change getting rid of the tip credit, instead increasing the tipped wage from $3.75 to $9.60 per hour and then to the minimum wage by 2024.
“To see that overturned overnight possibly in February would be devastating for this industry,” Winslow said. “It would be devastating for any industry to try to adapt to a (more than) 200% increase to their cost of doing business overnight. But even more so to this industry after what it’s been through the last two years with the pandemic.”
Winslow said he thinks Michigan “needs to keep a tip credit to keep its restaurants in business right now.” He said 43 states operate with a tip credit and “it works very well.”
If the change goes through in February, Winslow said one in six restaurants would close their doors “forever.”
“That has us pretty concerned considering we already lost 3,000 restaurants in the pandemic,” Winslow said.
Winslow also said between 40,000 and 60,000 jobs in the industry would be lost “almost overnight,” citing data conducted from the association’s members.
Roland Leggett, the Midwest campaigns manager for One Fair Wage, the group that led the minimum wage ballot initiative in 2018, said workers need the pay raise.
“We’re not seeing the rise of wages keeping up with the rise of inflation,” Leggett said. “So it’s incredibly important the workers get the raise they’ve earned.”
Leggett called the minimum pay increases “significant for workers in Michigan across the board.” He’s counting on the governor to “do the right thing” by supporting the minimum wage increase in February.
“When workers do well, it’s a better place to raise a family, to retire,” he said. “It really just creates a much better overall economic picture in Michigan.”
Leggett said millions of workers nationwide are leaving the restaurant industry because of low wages. He feels the pay increase is necessary help alleviate the worker shortage.
“It’s going to be very difficult to convince a lot of the workers that left the industry to return unless the wages reflect how difficult their jobs actually are,” Leggett added. “I’m confident that by ensuring this well-earned raise goes through that it would help to reverse a lot of the challenges a lot of these businesses are having in terms of attracting top-talent.”
Winslow said most restaurants are already paying more than minimum wage “because that’s what the market demand to get workers in the door.” The industry has seen its wages rise between 18% and 24% over the last 18 months, Winslow said.
“The market’s doing a great job increasing wages all by itself,” Winslow said.
Ben Stoneman, the owner of Flanagan’s Pub in downtown Grand Rapids, told News 8 he can’t get away with paying restaurant employees minimum wage in today’s market.
“We’ve had to raise what we pay people,” Stoneman said. “And it’s worked as far as keeping them.”
He said it’s necessary because of steep competition with other businesses for workers.
“Most restaurants I know are paying well over minimum now,” he said. “And servers are making well over minimum.”
Still, Leggett said many workers are getting left behind.
“We want there to be greater equality between all workers and ways in which they get that baseline pay, so restaurant workers aren’t relying on tips,” Leggett said.