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Published: Sunday, 3/16/2014 - Updated: 7 months ago

Raising minimum wages gets maximum play in Michigan

Coalition seeks vote as others worry about economic impact

BY TYREL LINKHORN
BLADE BUSINESS WRITER
Lisa Tury stocks shelves at Food Town in Monroe where she's been an employee for five years. Co-owner Ronnie Dallo, like other businessmen, worry about a wage increase’s effect on business, but he also cares about his 29 workers. Lisa Tury stocks shelves at Food Town in Monroe where she's been an employee for five years. Co-owner Ronnie Dallo, like other businessmen, worry about a wage increase’s effect on business, but he also cares about his 29 workers.
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MONROE — The group behind a ballot effort to significantly raise Michigan’s minimum wage believes public opinion is strongly on their side, even as many within the state’s business community fight against the effort.

“We’re pretty confident if we go to the ballot we’re going to win,” said Frank Houston of the Raise Michigan ballot committee.

The coalition is collecting signatures for a ballot initiative that would increase the state’s minimum wage from the current $7.40 per hour to $10.10 per starting in 2017, and tie future increases to the Consumer Price Index.

More controversially, the proposal also would raise the minimum wage of tipped employees — now $2.65 an hour — by 85 cents each year until they’re on par with regular hourly workers.

Backers say a minimum wage of $10.10 would give a raise to nearly 1 million Michigan workers, pulling many of them out of poverty and off government assistance programs. Supporters also argue it would boost the economy in Michigan, where the 7.8 percent unemployment rate remains more than a full percentage point higher than the rate in the rest of the United States.

“The reality is when you pay low-wage workers more money, they spend that money locally in the economy,” Mr. Houston said.

Raise Michigan has until May 28 to collect 258,000 valid signatures. If they succeed, the measure would be put before the state Legislature for approval. If legislators don’t approve it — and there’s little reason to believe they would — the question would go to the voters in the November election.

Boosting wages for low-paid workers has been a hot issue in recent years, and residents in several cities and states have voted to raise their minimum wage. The issue has drawn national attention as President Obama turns his focus to wage inequality.

Proponents say higher minimum wages reduce poverty and put more expendable income into the economy. But others contend that higher minimum wages eat into profits, reduce job opportunities, and cause price inflation.

The splits are predictable: labor groups and Democrats on one side, business groups and Republicans on the other.

The Michigan Chamber of Commerce has come out strongly against the proposal, saying it’s based on “fairy-tale economics” that would hamper job growth and hurt the people the proposal is trying to help.

“These costs have to come from somewhere,” said Wendy Block, who is a spokesman for the Chamber of Commerce.

“Employers who can’t afford to absorb the cost increase will look to make cuts elsewhere. Cuts to jobs, cuts to hours, cuts to benefits, all of which is not good for employees,” she said

Ms. Block said employers also are talking about investing in more automation, whether it be ordering by iPad in restaurants or turning to self-checkouts at grocery stores.

Employers tell The Blade they’re watching the proposal closely.

‘Like family’

Ronnie Dallo has 29 employees at the Food Town supermarket he co-owns in Monroe. About half his workers make minimum wage or just slightly more. Mr. Dallo worries that a higher minimum wage would affect his store’s bottom line, but he also said coming out against the proposal makes business owners look like the bad guys.

“You have to go with the punches,” he said. “What are you going to do besides that? It’s going to take a toll if it comes through, but what are you going to do? It’s not just our prices that are going to go up; everybody’s prices are going to go up.”

Mr. Dallo and his partners haven’t yet put pencil to paper to figure out how much a $10.10 minimum wage would affect them. However, he said he would never cut jobs to offset higher payroll costs.

“These guys are like family. Even though I’m an owner and operator, these guys are like family,” Mr. Dallo said. "They’re all good workers.”

Others say job losses would be inevitable.

In addition to the chamber, the Michigan Manufacturers Association and the Michigan Restaurant Association have come out against the petition, saying they believe it will make the state less competitive and cost jobs.

“It’s the wrong proposal at the wrong time in its entirety for a state that’s spent the last decade as the worst state in the economy and is just now emerging from that,” said Justin Winslow, the vice president of government affairs for the Michigan Restaurant Association.

Mr. Winslow said he’s been taking a lot of calls from nervous restaurant operators during the last few weeks, especially related to the proposal about tipped employees.

At $7.40, Michigan is above the federal minimum wage of $7.25 but below Ohio’s $7.95. The current minimum wage for tipped employees is $2.65 per hour in Michigan versus $3.98 in Ohio.

“You can’t quadruple the cost of doing business to a restaurant and expect it won’t have dramatic negative effects,” Mr. Winslow said.

He said some restaurateurs have said they’ll shut down if the proposal becomes law.

Fuzzy numbers

Though the debate over the minimum wage is often framed as a political one, even economists often find themselves on opposite sides of the discussion.

One reason for that, Brookings Institution economist Gary Burtless said, is because they have to rely on real world findings that are influenced by varying outside forces.

That is, raising the wage during boom times in California doesn't necessarily equal raising it during recession in West Virginia, but those are often the types of comparisons economists must work with.

“That kind of evidence produces ambiguous results,” Mr. Burtless said.

No comprehensive, independent study has been conducted on how a higher minimum wage would affect Michigan. However, there are some similarities between the proposal in Michigan and the call from President Obama for a $10.10 federal minimum wage by 2016.

The nonpartisan Congressional Budget Office recently examined Mr. Obama’s proposal and found that 16.5 million workers would receive higher weekly paychecks, and 900,000 people would rise above the poverty threshold.

But the CBO said higher wages would lead to an estimated loss of 500,000 jobs.

Both sides

Both sides of the debate have latched onto those figures to prove their point, but Mr. Burtless said looking at the report impartially, the good seems to outweigh the bad.

“Yes, you will face some risks. You’ll have a small chance of losing or your job, or failing to find one as fast, but that effect is completely dwarfed by the fact that people who retain their jobs enjoy considerably higher weekly pay,” he said.

Still, some employers trying to balance treating their employees right and staying in business worry that the proposal would tip the scales too much.

“I’m all in favor of the raise,” said Denise Ellsworth, owner of DaCapo coffee shop in Temperance. “I understand people have to make a living, but they can’t do it all at once. For a small business owner, they will put us out of business.”

She opened the coffee shop last July. She has nine employees. Most are paid about $8 an hour, above the state’s minimum wage.

She said she would be OK with paying them even more but said she’d need time to gradually raise her prices in order to afford her help. However, there’s “no doubt” a big jump all at once would put her out of business.

Still, she feels for those making lower wages.

“It doesn’t seem like there’s any middle income anymore at all,” she said. “You’re either way below it or at the top edge of it. It would be nice to have those people where they need to be.”

Poll shows support

For the time being, there’s substantial pubic support for higher minimum wages.

A Pew Research Center survey earlier this year found 73 percent of Americans were in favor of a national $10.10 minimum wage. Pew said 90 percent of Democrats favored the idea, while 53 percent of Republicans favored it.

Pew’s survey did not include state-by-state results.

A recent poll by Lansing research firm EPIC-MRA found 60 percent of Michigan voters would support a $10-an-hour minimum wage. However, the proposal hasn’t won over Republicans, with only 37 percent supporting the proposal.

Michigan’s minimum wage hasn’t changed since 2008.

Ohio’s minimum wage rises each year by the rate of inflation.

Contact Tyrel Linkhorn at tlinkhorn@theblade.com or 419-724-6134 or on Twitter @BladeAutoWriter.



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