Michigan’s minimum wage workers get a raise in September 2014

Changes to minimum wage prompted by citizen action to increase wages for workers is part of a national trend in 2014.

Michigan’s large tourism and service economy means that many workers depend on the minimum wage for their livelihood. Photo credit: Beth Stuever l MSU Extension

Michigan’s large tourism and service economy means that many workers depend on the minimum wage for their livelihood. Photo credit: Beth Stuever l MSU Extension

On May 27, 2014, Governor Snyder signed into law changes to Michigan’s minimum wage law. The law gradually increases the minimum wage from the current $7.40 an hour, which began in 2008, to $8.15 an hour on September 1, $8.50 on January 1, 2016; $8.90 on January 1, 2017 and $9.25 an hour by January 1, 2018. Tipped workers wages will rise from the current $2.65 to $3.51, or 38 percent of the minimum wage rate. From that point forward, the wage will adjust annually based on a five-year rolling average of inflation for the Midwest. Annual increases would take effect April 1 in each year after 2018, but no more than 3.5 percent. No increase would occur if the state’s unemployment rate for the preceding year was 8.5 percent or higher.

This legislative action is symptomatic of the reaction to citizen-led campaigns around the nation to increase the minimum wage to a “living wage.” In Michigan, lawmakers were prompted by a citizen petition drive to place a statutory initiative  on the ballot in November to increase the regular and tipped wages to $10.10 per hour before indexing the rate to inflation. Over 300,000 signatures have been collected in support of placing this question before the voters in November. However, the newly adopted minimum wage statute repealed the law that the citizen ballot proposal sought to amend; therefore it is unclear what will happen to the proposal. News sources predict that if the measure is placed on the ballot and passed by voters it will most likely be decided on in court.

State Minimum wage laws vary across the country, and Michigan is not alone in changing the minimum standard for wages in 2014. So far this year, several other states have adopted increases. Vermont’s legislature approved a bill in early May to raise their minimum wage to $10.50 by 2018; Maryland raised theirs to $10.10 by the same year. Minnesota, Delaware, West Virginia, Connecticut and Hawaii have also approved minimum wage raises this year. Currently the highest minimum wage rate in the country is $10.55 in the City of San Francisco.

The federal minimum wage is defined by provisions contained in the Fair Labor Standards Act (FSLA). The federal minimum wage is $7.25 per hour, which has been in effect since 2009. As indicated previously, some states provide greater minimum wage protection for employees. Employers must comply with both state and federal labor standards.

A federal minimum wage standard was first set in 1938 and has been changed 22 times since then. Since the federal minimum wage does not adjust with the rate of inflation, the purchasing power of the wage has lagged behind the rising costs of goods and services. Cities and states have adopted higher minimum wage standards over time to adjust for this difference. According to the United States Department of Labor Bureau of Labor Statistics  consumer price index calculator, the purchasing power for workers receiving minimum wage has varied over its history. When comparing the actual paid rate with the rate adjusted for inflation, the minimum wage in 1948 ($.25 per hour or $3.81 in today’s dollars) had the lowest buying power. At its high, the wage in 1968 ($1.60 per hour or $10.56 in today’s dollars) had the greatest buying power for workers. The current federal minimum wage is in the middle of those two extremes. To see a graphical representation, go to CNN’s Money History of the Minimum Wage since 1938.

Public policy leaders have been debating the merits of the minimum wage since its inception. Proponents for a higher rate say a living wage rate will help boost consumer spending, which is the biggest driver of the economy. Opponents say wage hikes cause job losses as business owners look for ways to automate entry-level jobs. Michigan’s large tourism and service economy means that many workers depend on the minimum wage for their livelihood.

Read the following Michigan State University Extension article for more information about citizen engagement in the legislative process:

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