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Minimum Wage in Michigan Set to Rise Beginning in September

May 28, 2014
Labor and Employment Advisory

It has been six years since Michigan last saw any increase in the minimum wage. But yesterday, both houses of the Michigan Legislature passed a compromise deal that would see the minimum wage gradually raised over time until it reaches $9.25 per hour by 2018. The measure was quickly signed into law by Governor Snyder last night. Now Michigan has joined a growing number of states which have boosted their minimum wage rates significantly above the federal minimum wage.

Under this new law, the current minimum wage in Michigan of $7.40 per hour will begin to rise effective September 1 of this year, until it reaches $9.25 per hour in 2018. After that, further increases in the minimum wage will be pegged to inflation. The specific dates of each increase are:

September 1, 2014: $8.15 per hour
January 1, 2016: $8.50 per hour
January 1, 2017: $8.90 per hour
January 1, 2018: $9.25 per hour

January 1, 2019
(and each January thereafter):

Rate to rise with inflation rate for Midwestern states, but not
more than 3.5% per year, and no increase if the rate of
unemployment meets or exceeds 8.5% in the prior year

Tipped employees will also see a rise in their minimum wage rate as a result of this new law. Currently in Michigan, tipped employees must be paid at least $2.65 per hour, and their hourly wage plus tips received must meet or exceed the minimum wage of $7.40 per hour, with the employer required to make up any shortfall. Under the new law, tipped employees must be paid at least 38% of the minimum wage. Thus, effective September 1, tipped employees must start receiving at least $3.10 per hour, rising to about $3.52 per hour by 2018. The employee's hourly wages plus tips received must still exceed the stated minimum wage, or the employer must make up the difference.

The new law was a compromise measure designed to head off a ballot initiative seeking to raise the minimum wage to $10.10 per hour, including for tipped workers. Many employer groups, including the Michigan Restaurant Association, were opposed to this ballot initiative, which would have appeared on the November ballot for all Michigan voters. Many of these groups viewed the new law as a workable compromise, and thus rallied behind it. Although the push to raise the minimum wage to $10.10 per hour now appears to be moot, the group promoting the ballot initiative, the Raise Michigan coalition, has signaled that it intends to proceed with submitting the necessary signatures to the Michigan Secretary of State, so it is possible that the issue will appear on the November ballot.

With this new law, Michigan's minimum wage will now be significantly higher than the federal minimum wage of $7.25 per hour. In fact, over 20 states now have minimum wage rates higher than the federal rate. It will be interesting to see if the U.S. Congress takes action to raise the federal minimum wage, or continues to sit back and allow the states to take the lead on this issue.

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