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DETROIT — An increase in Michigan’s minimum wage is set to launch, and with it comes a test of whether the gradual rise will help workers, harm businesses or neither.
The first bump comes Monday, when the wage moves up 10 percent, from $7.40 an hour to $8.15. The 25 percent overall raise comes in annual increments, capping at $9.25 in 2018. It directly affects about 4 percent of the state’s roughly 2.5 million hourly workers who earn the minimum wage or lower, but it could help some who make more since employers likely will adjust their pay scales.
Because of its modest, slow increase and the small number of people who make the minimum wage, Michigan State University economist Charles Ballard believes neither the fears of the biggest critics nor the dreams of the staunchest supporters likely will come true.
“It’s not going to shake the overall economy but in particular cases it can make a large difference,” he said.
The state’s first rate increase in six years comes amid others around the country, though Michigan’s rise is the slowest. It also arrives not through a natural groundswell of support, but because of a move by Republicans controlling state government this spring to head off a November ballot measure — since rejected by the Board of State Canvassers over a lack of qualified signatures — that could have raised the wage even more.
What’s more, $9.25 will only be worth about $8.50 by 2018 if current inflation trends continue, Ballard said. Still, he said, the immediate gains should outweigh the losses.
“I think there are some cases where an employer wouldn’t hire someone, but those effects are going to be small,” he said. “I predict the total number of dollars going to the affected group of workers will go up. Most of them will receive a 10 percent increase in wages and not get laid off.”
For example, he said, the increase taking effect Monday represents 75 cents an hour and $1,500 annually for someone working full-time.
“It may make difference between sending your kids to bed hungry and not,” Ballard said.
Trisha Steele, 30, had until recently made minimum wage working for Pizza Hut but now makes $9 an hour as a property manager. The single mother of two from the southeastern Michigan city of Adrian recently received her certification to become a dental assistant and is looking for a job.
“I said, ‘I have to do something because this minimum wage isn’t going to get me anywhere,‘” she said. “Sometimes I feel like I’m OK, then things happen and money has to go other places, like for car repairs. I still struggle, but I have a more positive outlook on how it’s going.”
Steele said gradually increasing the minimum wage is a “great idea” that should benefit employees but “shouldn’t overwhelm employers.”
The Michigan Restaurant Association, National Federation of Independent Business and other groups argued any wage hike would cut into business profits, causing closures and layoffs. The restaurant group called the resulting legislation imperfect but preferable to the more “catastrophic” ballot proposal.
For one group advocating for the poor, the wage increase is a good step but not enough to counter a gender wage gap and reverse wage losses. The Michigan League for Public Policy seeks an increase to $10.10 an hour — the amount sought by the derailed ballot initiative — and other policy changes.
Ballard said a hike within that range wouldn’t do economic harm but he’d be wary of significantly higher increases.
“You do want to be cautious and incremental,” he said, but added that Michigan’s increase provides “significant gains for some people who really need it and not a whole lot of downside.”