Next year, Michigan’s minimum wage and tipped minimum wage will receive a significant boost due to a recent ruling by the state’s Supreme Court.
According to the ruling, the state treasurer has been instructed to create a fresh hourly minimum wage that will come into effect on February 21, 2025. This new minimum wage will be set at $10 per hour, with an additional adjustment for inflation from 2018 to 2024. Moreover, the tipped minimum wage will also see an increase and will be set at 48% of the standard minimum wage.
Workers who primarily earn their wages through tips, such as restaurant servers and bartenders, are often subject to a lower hourly rate known as the tipped minimum wage.
Michigan’s current minimum wage stands at $10.33 per hour. However, the inflation-adjusted minimum wage is slated to exceed that in the coming year. In the state, the tipped minimum wage is currently set at 38% of the standard hourly minimum wage, which amounts to $3.93 per hour.
Next year, there will be changes to both of those.
Let’s dive into the nitty-gritty of how the minimum wage issue made its way to the state’s high court and explore the potential impact of an inflation-adjusted minimum wage.
What will minimum wage be in Michigan after the ruling?
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Starting in 2025, the minimum wage will see an increase to $10 per hour along with an inflation adjustment. Meanwhile, the tipped minimum wage, also known as tip credit, will rise to 48%. The following year, in 2026, the minimum wage will further increase to $10.65 per hour with the tip credit rising to 60%. In 2027, the minimum wage will be $11.35 per hour with the tip credit increasing to 70%. Finally, in 2028, the minimum wage will reach $12 per hour with an inflation adjustment while the tip credit will be at 90%.
Starting in 2029, the state treasurer will be responsible for calculating the minimum wage adjusted for inflation. Additionally, the tip credit will be eliminated during this time.
According to the Bureau of Labor Statistics’ Consumer Price Index, the inflation adjustment should consider the inflation rate between 2018 and 2024. Economist Don Grimes from the University of Michigan predicts that the minimum wage for next year could be roughly $12.58 per hour, taking into account a 25.8% inflation rate based on CPI data from June 2018 to June 2024.
What do the changes to the tipped minimum wage mean?
The state of Michigan’s decision to raise and ultimately eliminate the tipped minimum wage could potentially have significant implications for both employees and employers across the state.
In Michigan, tipped workers are expected to earn the majority of their income through tips, resulting in an hourly tipped minimum wage of $3.84.
The tipped minimum wage is set to gradually increase each year and will ultimately be eliminated in 2029, thanks to the recent ruling by the Michigan Supreme Court.
Restaurant operators are worried about how the rising wage costs will impact their business operations. According to a survey conducted by the Michigan Restaurant and Lodging Association, a majority of 186 restaurant operators who participated expressed their concerns. They stated that they would have to increase prices and lay off employees to adjust to the increase in wages. The association, which filed briefs supporting the Legislature, published the survey results in June.
Maria Dwyer, co-manager of the food and beverage hospitality group at Clark Hill Law Firm, explained that eliminating the tip credit and raising employee wages to minimum wage would be a substantial change for restaurants considering a business venture in the industry.
According to Paychex, seven states and Washington, D.C. have no tipped minimum wage at present. These states are Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington.
Elimination of the tip credit was welcomed by supporters of increasing the minimum wage.
According to a statement from Saru Jayaraman, President of One Fair Wage, this is an excellent day for over 860,000 workers in Michigan who will receive a pay hike. One Fair Wage is a nationwide organization, and Michigan One Fair Wage was one of the litigants in the lawsuit.
“After a long and hard-fought battle, we have emerged victorious over the corporate entities that spared no effort in their attempt to deny fair wages, including tips, to all workers, including those in the restaurant industry.”
Save MI Tips, a group that advocates for the preservation of the tipped minimum wage, is urging the Michigan Legislature to pass legislation that would maintain the tip credit. They are calling for action before the year-end and are hoping that lawmakers will heed their plea.
Why is the Michigan Supreme Court addressing minimum wage?
On Wednesday, the court’s justices published a 4-3 decision stating that the state Legislature acted unconstitutionally in 2018 by adopting two ballot initiatives and subsequently amending them during the same session. Among those initiatives was a petition to increase Michigan’s minimum wage to $12 per hour by 2022 and gradually eliminate the tipped minimum wage.
Incorporating the petition language, the Legislature has approved the proposal to increase the minimum wage to $12 an hour. However, the implementation of the wage hike has been postponed till 2030. Additionally, the tipped minimum wage remains unchanged, continuing to be 38% of the regular minimum wage.
Michigan has taken a step forward by introducing a new initiative to expand paid sick leave. According to this initiative, every Michigan employer is now required to provide one hour of paid sick time for every 30 hours of work. Employers with less than 10 employees are required to allow their employees to accrue up to 40 hours of paid sick time annually, while employers with 10 or more employees have to permit their workers to accrue up to 72 hours of paid sick time per year. This initiative will undoubtedly benefit Michigan employees by providing them with the necessary time off to recover from illnesses without worrying about losing wages.
The petition underwent an amendment in 2018, whereby the paid sick leave mandate for companies having less than 50 employees was eliminated by the Legislature.
On Wednesday, the court ruled in favor of the petition organizers who had sued the Legislature. The court reinstated the original intent of the petition initiatives. However, as the deadline for the $12-per-hour minimum wage in 2022 has already passed, the justices have directed the state treasurer to establish a new wage scale that takes into account inflation from 2018 to 2024.