In April, California’s minimum wage for fast food workers rose to $20 an hour, 25% higher than the $16 per hour wage for all other workers. While Michigan’s increase is different, examining outcomes in California is informative.
“It resulted in firms being forced to make adjustments. We know they’re staffing less. We know they’re cutting hours. We know they’re cutting overtime.”
Grand Valley State University’s Paul Isley is associate dean in the Seidman College of Business.
He says early data shows those decreases in hours, overtime and staffing mean most workers with the wage increase will likely just break even.
“So it may not be better for the worker although I guess they’re working probably fewer hours to get the same money but if the concept was ‘I need to earn more’ than its not accomplishing this on average.”
Isely notes workers can be replaced citing technology’s introduction when restaurant wages went up post-pandemic.
“We started seeing more kiosks for ordering. We started seeing more QR codes for ordering. We started to see them wanting us to use apps to order before we got there so you don’t even have to interact with a person.”
In Michigan workers who depend on tips will see their hourly salary go from just under $4 to $12 an hour.
Isley says they will likely be most affected in part because research shows customers tend to tip less when they know workers are making more per hour.
“If I change from tipping 20% to tipping 15% and you do that across the tables people have, those servers will actually be worse off in many cases just for that small little tweak.”
Customers may also eat out less as restaurants increase prices to cover added costs.
Michigan’s minimum wage increases go into effect February 2025 with tipped workers gradually reaching $12 an hour in 2029.
