Advance Notice: Briefs

Michigan is almost at full employment. What impact will minimum wage maneuvering really have?

By: - December 4, 2018 5:46 am

While many progressives are up in arms at the GOP-led Legislature’s attempts to gut an initiative raising the minimum wage, a report this week in Crain’s Detroit points out that it could be a moot point anyway.

That’s because many economists believe that because Michigan’s low unemployment rate is under 4 percent, the market rate for wages will likely continue to push above the existing mandated minimum wage of $9.25 per hour.

At least for now.

“The minimum wage isn’t binding for many workers now,” Michigan State University economist Charles Ballard wrote in Crain’s. “On the other hand, one pessimistic possibility is that wages for low-wage workers could fare so badly in the next 12 years that there would be workers who would be paid less than $12 per hour, even in 2030, in the absence of a minimum.”

The Legislature this week is expected to take up a measure that would bring the mandated minimum wage to $12 per hour by 2030. In September, the Legislature passed a citizen-initiated proposal that would hike the minimum wage to $12 by 2022. Tipped workers, who have a $3.52 minimum wage per hour, would also see an increase to $12.

A Purdue University economist told the Advance that the more gradual minimum wage increase preferred by business groups and the GOP Legislature will likely have adverse effects on lower-wage workers and some further up the chain, but it could be beneficial to the broader economy in terms of mitigating job losses sometimes associated with minimum wage increases.

Kevin Mumford, an associate professor of economics at Purdue University said that in many cases, the market can better dictate wages than academics or politicians can.

“Economists don’t know what wages should be. We don’t what the right wage is for any particular occupation,” Mumford said, adding that employers have found success dealing with labor shortages by offering higher wages.

“We tend to defer to what the market is willing to pay,” Mumford said. “Restaurant owners might complain that they can’t find workers willing to work at the price they’re offering, but if they offered a higher wage, I bet they would find workers. I’ve found that firms always like to complain about not being able to find workers, but if they paid more, they would find them.”

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Nick Manes
Nick Manes

Nick Manes is a former Michigan Advance reporter, covering West Michigan, business and labor, health care and the safety net. He previously spent six years as a reporter at MiBiz covering commercial real estate, economic development and all manner of public policy at the local and state levels.