Raising Michigan's minimum wage will help our economy



Will minimum wage increase help or hurt?

Written by Lansing State Journal April 4, 2014

Michigan and the nation are debating proposals to increase minimum wage to $10.10 per hour. This week’s Greater Lansing Outlook explores the pros and cons.

By the numbers

$7.25 current federal minimum wage, last increased in 2009.

$7.40 current Michigan minimum wage, also last increased in 2009.

$2.65 current Michigan minimum for employees who rely on tips, such as wait staff.

$10.10 minimum wage President Barack Obama wants federally and the minimum wage figure supported by Raise Michigan, a group campaigning to increase the state’s minimum wage with petition initiated legislation that could be approved by the Legislature or a vote of the people. The higher Michigan minimum would also apply to tipped workers, going up 85 cents per hour per year until they match the $10.10.

900,000 number of people the Congressional Budget Office says would raise above the poverty line with the higher minimum wage.

500,000 number of jobs the CBO projects would be cut due to a higher minimum wage.

21 states (including Michigan and the District of Columbia) that have minimum wage rates higher than the federal rate.

8 states (including the District of Columbia) that have increased their minimum wage since President Obama first called for a higher federal minimum in his 2013 State of the Union address.

258,000 number of signatures needed to send Raise Michigan’s wage increase statute to lawmakers. If not passed by the legislature, the proposal would then appear on a statewide ballot to be decided by voters.

Sources: U.S. Department of Labor; Congressional Budget Office; New York Times; Detroit Free Press.



Raising Michigan's minimum wage will help our economy

One of our American ideals is that you can get ahead if you work hard and play by the rules. We value people who show up to work each day and earn their paycheck through sweat and persistence. However, it is becoming harder and harder for those working at or near the minimum wage to even survive.

That’s why a coalition of working people and community advocates have launched a campaign to place a ballot measure before voters in November to raise Michigan’s minimum wage.

The proposal would gradually increase Michigan’s minimum wage to $10.10 per hour by January of 2017 — something that is often overlooked by opponents of our efforts. It would also ensure that the minimum wage keeps up with inflation and it would guarantee that tipped workers would earn at least the minimum wage.

If successful, the campaign will ensure that people who work full-time will be able to afford the basics such as food, rent and other necessities. The increase will raise the incomes for nearly 1 million Michiganders. A necessary wage increase like this will allow working mothers to put food on the table, families to keep the heat on during Michigan’s cold winters and allow workers to invest in more reliable transportation so that they can get to work on time.

Not only will front line workers benefit. Our state and local economies will also benefit because workers who are making a decent wage will be able to have enough spending money to put that additional cash they’ve earned right back into their local economy.

And for the more conservative brand of voter out there, those who are concerned about government spending: Raising the minimum wage to $10.10 will save $205 million in food assistance dollars in Michigan.

Many people working full-time minimum wage jobs are on assistance because the current minimum wage asks people to live on just $15,400 a year. That’s lower than the federal poverty level for a family of two, which is $15,730. Therefore, our state spends nearly $251 million dollars annually in assistance for fast food workers alone.

Not only will an increase in the minimum wage save our state money, it will lift people out of poverty and give these working families the ability to survive without seeking assistance. This proposal will give workers the dignity of earning a wage that values the work they do while saving our state millions of dollars in assistance. That’s an argument both sides of the political spectrum can agree on.

Raising the minimum wage is a win for workers, businesses and the state.

Lifting workers out of poverty will also lift children out of poverty as well. In Michigan, about 15 percent of children have parents working in low-wage jobs. Raising the minimum wage will have positive benefits for the children of low-wage workers lifting them out of poverty and into increased academic performance. Studies show that for every additional $1,000 in annual household income, children’s academic achievement also increases a modest amount and a $3,000 boost in household income is equivalent to two additional months of school.

More and more, our economy is dependent on service workers to prepare our meals, stock our shelves, care for our loved ones and hold numerous other critical occupations. However, these workers are struggling just to survive at the current minimum wage. The Raise Michigan coalition’s proposal for a modest increase in the minimum wage will allow us, as a state, to reaffirm our value that hard work pays off.

Written by Danielle Atkinson is director of Mothering Justice, a member organization of the Raise Michigan Coalition.



A living wage is an equal voice for Americans

Take a look at your bills: What do you pay for food, housing, clothing, health care, utilities and transportation? How much would it take for your family to just get by? Could you make it on $15,000 a year? $21,000? What would your family have to do without to make ends meet?

What exactly does it take to make it in America?

The working poor are not fundamentally different, nor do they practice some kind of magical math that allows them to support their families on wages that would sink your own.

Last year, President Obama called for a raise in the federal minimum wage from $7.25 to $9 an hour. In November, the president joined other Democrats in supporting a proposal to take minimum wage to $10.10 per hour. The controversy that followed was as predictable as it was irrelevant to those with the most at stake: the low-wage working poor.

As usual, voices of those most affected have been glaringly absent. Also missing is any discussion of the bread-and-butter question: What is it actually like to live on $7.25 or $9 an hour? Does either of these numbers constitute what working families need and deserve?

Although the terms “minimum wage” and “living wage” are sometimes used interchangeably, their meanings are quite different. A minimum wage is the lowest a business can legally pay. A living wage is what its workers need to meet their families’ basic needs — to stave off the choice between a gallon of gas and a gallon of milk.

A full-time worker at the federal minimum wage makes $14,500 a year, placing him or her below the federal poverty line if that worker is supporting a family of two or more. A $9-an-hour minimum wage would push that annual income up to $21,000. But if you look at that “raise” in inflation-adjusted dollars, it leaves today’s minimum-wage worker making significantly less than he did in 1968.

Low-wage workers, despite the “fuzzy math” of the minimum-wage debate, cannot spin paychecks of straw into middle-class gold. The working poor do what they must, whether that means living in substandard housing or making do with low-cost, low-nutrition food. But their bottom-line needs are no different from anyone else’s.

President Obama’s savviest move may have been his call for communities to act on their own, passing living-wage ordinances at local and state levels. In Washington State, for example, legislators have introduced a measure to raise the state’s minimum wage from $9.32 an hour to $12 an hour by 2017.

This livable-wage issue is a priority for the Marguerite Casey Foundation. So when we found out that the general manager of the hotel we had booked months in advance for a staff retreat helped lead the campaign against a minimum-wage increase, we were taken aback. It was too late to cancel our reservation, so we opted to do what we had each day since the foundation’s inception: We would wear our values on our sleeves — literally.

The morning of the retreat, 25 staff members arrived at the hotel, all wearing T-shirts saying, WE SUPPORT A LIVING WAGE. The hotel’s general manager soon sought us out.

But he had not approached us to debate a living wage. His concern was narrower. “Are there more of you?” he said.

In the short term, it was easy enough to reassure him that, no, there were no busloads of protesters heading for the hotel.

But the truer answer is, Yes, there are more of us — families across America who believe in the promise of the American Dream.

How could we explain that all we wanted was for those who slept in beds and ate food made by minimum-wage workers to question policies and priorities that leave those workers struggling to feed and house their own families? And for businesses like his to recognize that it takes a work force to grow a profit line. No matter how good the product, a business is only as good as the people it employs. Don’t they deserve more than minimum wage?

A USA Today/Pew Research Center poll found that nearly two-thirds of Republicans (64 percent) and more than nine out of 10 Democrats believe government should take action to reduce poverty.

If 25 of us wearing T-shirts stating our support for a living wage rattled the administration of a hotel, what might the 46 million people living in poverty in this country achieve working together?

Perhaps they could move the country in the direction where most Americans stand.

Written by Luz Vega-Marquis is president and CEO of the Marguerite Casey Foundation.



Increase minimum wage and watch jobs fade away

As Michigan’s economic comeback gains steam and the dismal decade of staggering job losses becomes just a bitter memory, along comes a group of people with good intentions — but terrible ideas — who would take Michigan backward. A coalition called Raise Michigan is launching a legislative initiative petition drive to raise Michigan’s minimum wage to $10.10 an hour. It’s a crowd-pleasing proposal for sure. The trouble is that it’s also a job-killing one.

Now let’s stipulate that academic research on the subject of how minimum wage increases effect employment levels are rather equivocal. It’s surprising that a subject that’s received this much attention has research findings that are so unclear. But let’s put that aside, because there’s actually little that studying minimum wage increases in the ’70s, ’80s and ’90s can tell us. We’re simply in a different time.

Never has it been easier or more cost effective to substitute automation and self-service for employees. We see it all around us.

President Barack Obama instinctively understands this. He once famously blamed ATM machines for the unemployment rate. Obama told NBC News, “There are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers. You see it when you go to a bank and you use an ATM, you don’t go to a bank teller, or you go to the airport and you’re using a kiosk instead of checking in at the gate,” he said.

The President has it right. That’s why it makes little sense to drive up the cost of entry-level employees. More than ever, tablet computers can easily replace those employees.

Think about your local fast food restaurant. There used to be an employee there pouring every drink. But those days are long gone; customers serve themselves and that employee is gone. It’s easy to see how the next step will be eliminating the employees who take your order. They’ll be replaced with an inexpensive touch screen device that will be happy to ask you if you want fries with that.

The same thing can happen back in the kitchen as well. One California company has invented a fully automated machine that can create 300 gourmet hamburgers an hour. There is virtually no part of today’s fast food restaurant that can’t use machines in the place of employees.

This proposal will also hit the restaurant industry like a bomb. It more than triples the minimum wage for tipped employees like waiters and waitresses. With such a dramatic increase in wages there is no doubt that more and more restaurants will follow in the footsteps of Applebee’s by replacing their service staff with tabletop computers. Instead of a dozen waiters or waitresses on the job, there will be just a few food runners.

Jobs in retail stores will be hit hard too. Many grocery stores already have stations where customers scan their own cart full of goods and bag the groceries themselves. Expect that trend to explode with a higher minimum wage.

Of course the small businesses on every Main Street in Michigan will be hurt as well. They won’t have the capital to invest in new computer hardware and software, or new forms of automation. The local sandwich shop won’t be able to automate sandwich making and the local florist will still need employees to arrange the flowers. They'll be faced with either absorbing sharply higher labor costs, or simply eliminating employees.

Again, the men and women promoting this proposal have good intentions. We all want to see people enjoy a higher standard of living. But raising the minimum wage in a soft economy is simply guaranteed to cut the bottom rung off of the economic ladder for thousands of Michigan’s workers, especially young people who are just getting started in the job market.

One especially damaging feature of this initiative is that if enacted by voters at the polls, it would take a super-majority vote of the Legislature to change it, no matter how much economic damage it was doing. Michigan has had plenty of experience with special interest groups trying to impose their will at the ballot box, and voters have wisely said no again and again. This should be another one of those times.

With a stronger economy and a very low unemployment rate, wages will rise all throughout the workforce. Voters should focus on policies to create that booming job market rather than accelerating the trend toward automation with a destructive proposal like this one.

Written by Fred Wszolek is a spokesperson for the Workforce Fairness Institute.



Michigan's restaurant workers will be hard hit

Some people never learn.

It’s been less than two years since labor unions backed a proposal to enshrine collective bargaining in the Michigan state constitution. Its resounding defeat should have served as a lesson in the consequences of overreach. But today, a coalition of unions and labor-aligned activist groups is collecting signatures to put an equally-radical idea on the 2014 ballot: A 280 percent increase in the base wage for employees who receive tip income.

If that sounds extreme, it’s because it is — even a main organizer for the effort called it a “dramatic change.” If it takes effect, the evidence suggests there will be serious consequences for restaurants and the people they employ.

Tipped employees (think waiters and waitresses) are subject to the same minimum wage in Michigan as employees who don’t receive tips. Their employers are permitted to pay a lower base wage so long as employees earn at least the full minimum when tips are included. The difference between the two is called the tip credit.

Restaurants make up the difference if employees don’t earn sufficient tip income to equal the full minimum. In practice, however, this isn’t an issue: Census Bureau data show that the average hourly wage for tipped restaurant employees is above $13 an hour, and top earners bring in $24 an hour or more. In this way, the tip credit is a compromise that works for both the employer and employee: Restaurants can keep prices low for customers, and servers can earn an hourly wage (tips are treated as wages by the IRS) that’s considerably higher than the state minimum.

But not everyone agrees: Seven states require tipped employers to pay the full minimum wage to their employees in addition to any tip income received. The evidence from these seven states and others that have substantially increased the base wage for tipped employees should give pause to proponents who want to make Michigan the eighth state.

For instance, a study from economists at Miami and Trinity Universities — published last month in the Southern Economic Journal — examined 20 years of government data on tipped employees, and found that each 10 percent increase in their base wage has reduced employment in the full-service restaurant industry by just under 1 percent. In Michigan, that means a 280 percent increase in the base wage would cause a greater than 22 percent drop in employment in the industry — the equivalent of roughly 30,000 jobs.

What happens to those jobs? The evidence from other states is instructive. In Seattle and San Francisco, for instance — where hourly labor costs are at a level similar to what activists in Michigan are seeking — many restaurants have stopped hiring bus boys, opting to have servers bus their own tables instead. Employers have also adjusted work schedules so that fewer servers are needed per shift.

Technology has enabled even larger changes: Restaurant chains such as Applebee’s, Chili’s, and California Pizza Kitchen have embraced tabletop ordering tablets that reduce the need for servers by as much as 25 percent. And a new report from analysts at KeyBanc Capital Markets suggests that restaurants may be forced to embrace technology more widely as a consequence of mandated increases in labor costs.

“Forced” is the key word here. Even celebrity chef Tom Colicchio — a supporter of a higher minimum wage — estimated that eliminating the tip credit would (all else equal) jack up food prices by 25 percent to 30 percent.

If Michigan restaurants thought they could raise prices accordingly without losing sales, there would be little controversy about the current proposal. In fact they would have already increased their prices. But it’s precisely because customers are price sensitive and can opt to eat out less often (or not at all) that employers will be forced to scale back on hiring or rethink their business model entirely if the tip credit is eliminated.

There’s an old saying — if it’s not broke, don’t fix it. It’s good advice for Michigan’s labor activists, whose ideas are threatening to make well-paid tipped employment and the income it provides a thing of the past.

Written by Michael Saltsman is research director at the Employment Policies Institute.



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