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GVSU business professor weighs in on minimum wage impacts

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In January Michigan’s minimum wage took a 23-cent jump, landing at $10.10 per hour for non-tipped workers, but whether it will rise again is still being decided.

Michigan’s minimum wage is now above $10 per hour, the highest record in state history. Wages could see another increase this year, but will it be enough to battle inflation? WGVU spoke Grand Valley State University's Seidman College of Business to learn more.

In January Michigan’s minimum wage took a 23-cent jump, landing at $10.10 per hour for non-tipped workers. Wages for tipped workers also increased to $3.84 per hour.

The increase came from the Michigan’s Improved Workforce Opportunity Wage Act of 2018, which is currently pending litigation, after state lawmakers adopted and amended the law. If the courts decide on implementation the law's original guidelines, the minimum wage would raise to $13.03 per hour for non-tipped workers and $11.73 for tipped employees.

“Three years ago that would have been a big hit, now we’re in a world where the average hospitality worker in Michigan in making nearly $17 an hour, so going to a minimum wage of $13 an hour is going to again not effect not a lot of people and is going to be relatively small," Paul Isley, Associate Dean for Undergraduate Programs in GVSU's Siedman College of Business said.

Isley explains an already competitive wage market coupled with inflation keeps impacts of the recent increase relatively low but adds low-income workers may still feel small effects.

“They’re going to feel effect one way or another. A raise is a raise. Right now to keep pace with inflation you have to be seeing 7-8% increase," he said, "If we went to $13 an hour that would be more than a 30% increase, so that would be a substantial change to their income...You need to set the minimum wage high enough that its effective of the individual but not too high that it becomes worthwhile to substitute away from those workers.”

When asked about the impact on businesses, Isley estimated the most recent wage increase would cost less than $50M across Michigan and a greater increase to $13.03 would cost around $120M.

"The real issue here in the uncertainty and drastic changes at one time. You want things to go up in a consistent manner and done in small enough steps that the businesses can adjust to it as opposed to being thrown in a pot of boiling water really quickly," he said.

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