A massive Michigan Supreme Court ruling will result in boosts to the state's minimum wage and tipped minimum wage next year.
The ruling directs the state treasurer to establish a new hourly minimum wage to take effect Feb. 21, 2025. That minimum wage will be $10, plus an adjustment for inflation from 2018 to 2024, per hour. The tipped minimum wage will also rise to 48% of the standard minimum wage.
The tipped minimum wage is the lower hourly rate given to workers who are expected to make the bulk of their wages through tips, like bartenders and restaurant servers.
The minimum wage in Michigan is currently $10.33 per hour. The inflation-adjusted minimum wage will surpass that next year. The tipped minimum wage is currently 38% of the standard hourly minimum wage, clocking in at $3.93 per hour.
Those will both change next year.
Here’s some detail on how the issue of minimum wage got to the state’s high court, what an inflation-adjusted minimum wage could look like and more:
What will minimum wage be in Michigan after the ruling?
Minimum wage will be $10 an hour plus an inflation adjustment in 2025, with the tipped minimum wage, or tip credit, rising to 48%. It increases to $10.65 plus an inflation adjustment in 2026, with the tip credit rising to 60%. In 2027, it will be $11.35 plus an inflation adjustment, with the tip credit rising to 70%, before minimum wage finally rises to $12 plus an inflation adjustment, with the tip credit at 90%, in 2028.
In 2029 and after, the state treasurer will be tasked with determining an inflation-adjusted minimum wage and the tip credit will no longer exist.
That inflation adjustment must account for inflation from 2018 to 2024, using the Bureau of Labor Statistics’ Consumer Price Index. Don Grimes, an economist at the University of Michigan, said minimum wage could be about $12.58 an hour next year, accounting for 25.8% inflation from CPI data from June 2018 to June 2024.
What do the changes to the tipped minimum wage mean?
The increase to, and eventual elimination of, the tipped minimum wage in Michigan, could have larger ramifications for workers and employers in the state.
Currently, the hourly tipped minimum wage in Michigan is $3.84, as tipped workers are expected to make the bulk of their earnings through tips.
Thanks to the Michigan Supreme Court’s ruling, the tipped minimum wage will gradually increase each year until it’s totally eliminated in 2029.
Restaurant operators have expressed concerns about what the increased wage costs will mean for their business operations. A June survey published by the Michigan Restaurant and Lodging Association (which filed briefs in support of the Legislature in the case) found a majority of 186 restaurant operators surveyed said they would increase prices and lay off employees to accommodate for the rise in wages.
“When you’re thinking about a restaurant business, to eliminate that tip credit and to increase employees to the minimum wage, that's a huge change for restaurants,” said Maria Dwyer, an attorney at the Clark Hill Law Firm, where she co-manages the food and beverage hospitality group.
Seven states; Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington, plus Washington, D.C., do not currently have a tipped minimum wage, according to human resources platform Paychex.
Backers of raising the minimum wage, however, applauded the elimination of the tip credit.
“This is a great day for the more than 860,000 workers in Michigan who are getting a raise,” Saru Jayaraman, president of One Fair Wage, said in a statement. One Fair Wage is a national group; Michigan One Fair Wage was one of the plaintiffs in the case.
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“We have finally prevailed over the corporate interests who tried everything they could to prevent all workers, including restaurant workers, from being paid a full, fair wage with tips on top.”
Some groups are calling for the Michigan Legislature to maintain the tipped minimum wage. Save MI Tips, a group formed to organize against the elimination of the tip credit, urged lawmakers to pass legislation maintaining the tip credit before the end of the year.
Why is the Michigan Supreme Court addressing minimum wage?
In a 4-3 decision published Wednesday, a majority of the court’s justices ruled the state Legislature acted unconstitutionally in 2018 when it adopted a pair of ballot initiatives and then amended them within the same session. One of those petition initiatives sought to raise Michigan's minimum wage to $12 an hour by 2022 and to raise and eventually eliminate the tipped minimum wage.
The Legislature adopted the petition language but amended it to delay the increase to $12 an hour until 2030. The adopted language also maintained the tipped minimum wage at 38% of the regular minimum wage.
A second initiative sought to expand paid sick leave, requiring Michigan employers to provide one hour of paid sick time for every 30 hours of work. Employers with fewer than 10 employees would have to allow employees to accrue up to 40 hours of paid sick time annually, and employers with 10 or more would have to allow employees to accrue up to 72 hours of paid sick time per year.
In 2018, the Legislature amended the petition to remove paid sick leave requirements for employers with fewer than 50 employees.
Petition organizers eventually sued the Legislature, culminating in Wednesday’s ruling. The court restored the initial intent of the petition initiatives, but since the 2022 timeline for a $12-an-hour minimum wage has already passed, justices ordered the state treasurer to set a new wage scale that accounts for inflation between 2018 and 2024.
Note: This article has been updated online to correctly reflect the current tipped minimum wage in Michigan.
Contact Arpan Lobo: alobo@freepress.com
This article originally appeared on Detroit Free Press: Minimum wage in Michigan could rise to over $12 next year after Supreme Court ruling
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