AA local businesses discuss impact of a potential $15 minimum wage policy
Speaker Nancy Pelosi, D-Calif., announced Feb. 11 that a raise in the federal minimum wage to $15 would be included in the $1.9 trillion coronavirus relief bill. The bill, if passed by the House of Representatives, would be able to bypass the 60-vote filibuster in the Senate through budget reconciliation and only requires a simple majority to be voted into law.
However, the bill faces significant roadblocks in the Senate. With a 50-50 divided Senate, all 50 Senate Democrats and Vice President Kamala Harris would have to vote to enact the bill through budget reconciliation.
The potential increase to the minimum wage, which would include gradual increases over a period of four years, would be the first time Congress has raised the minimum wage since 2009, where it was set to $7.25 per hour. In Michigan, the minimum wage is currently set at $9.65 per hour. A $15 per hour hike would represent a nearly 107% increase in the minimum wage on the federal level and a 55% increase for the state of Michigan.
Dr. Wally Hopp, University of Michigan Business and Engineering professor, said he has reservations about the unprecedented wage increase, especially during a pandemic. Hopp said he thinks Congress should wait until the economy has recovered to raise the minimum wage and to do so in a more phased approach than the current plan.
“If we go too suddenly absolutely, (there’s risks),” Hopp said. “Using a phased approach … we’re going to aim to get to $15 an hour, but we’re going to go on a pace that takes into account inflationary effects and unemployment.”
Engineering sophomore Nick Tran said he believes that the federal minimum wage should be higher than $15 per hour. Tran is from Seattle, a city that has already implemented a $15-per-hour minimum wage, and said that the increased wages allowed him to save up money for college and put more money into the economy.
“(The wage) allows me to support myself based on that salary,” Tran said. “If I was paid a lot less than that it would be somewhat more of a problem.”
It costs almost 32% less to live in Ann Arbor than it does to live in Seattle. Hopp said that he believed the role of the federal government is to set a bare minimum wage that could be increased gradually, but that the real increases should come at the state and local levels.
“The minimum wage should be different for different parts of the country, and it is,” Hopp said. “I think there is a role for setting a bottom for the federal minimum wage … if we sort of push on the bottom of the wage scale a little bit, then it forces people like myself to make decisions to accommodate (employees).”
Hopp is also the owner of Great Harvest Bread Company in Lake Orion, Mich., and noted business owners have options other than layoffs when it came to balancing their budgets in the face of an increased minimum wage. These options, such as reduced hours and underemployment, are not counted in current unemployment metrics.
“In order to stay in business at all, I really only have two levers: one is to increase prices and the other is to decrease hours,” Hopp said. “If I can’t be viable with adjustments to those two, then I go out of business.”
James Wilhelm, the General Manager of Black Pearl on Main Street, spoke to the challenges his restaurant would encounter in the face of an increased minimum wage. Wilhelm said his business has thirteen employees making less than $15 per hour with approximately half of them as high school or college students.
He said business has changed drastically over the course of the pandemic, and he had to temporarily consolidate positions to ensure safety and to cut costs. If the minimum wage were to be raised, those changes could become permanent, Wilhelm said.
“Currently my servers are running their own food and bussing their own tables which is something pre-pandemic … we were paying (other) people to do,” Wilhelm said. “If the minimum wage goes up, there’s no way I could afford to pay the servers (that wage), plus pay a food runner, plus pay a busser.”
If he were to give raises to employees to get them to the new minimum wage, Wilhelm said he would have to give equivalent raises to the rest of his staff to maintain the same hierarchy as before the wage increase. This increase would likely lead to him having to further consolidate employees or raise his prices.
Wilhelm said he feels fortunate that his restaurant has larger ticket prices than other restaurants. Smaller, lower-priced restaurants, he feared, wouldn’t be able to handle the increase nearly as well.
“I hope (government officials) talk to real restaurant owners and actually get the opinions of people who have been doing this,” Wilhelm said. “My restaurant may survive, but it doesn’t mean all restaurants are going to survive … I worry about the smaller restaurants that aren’t as busy (as Black Pearl).”
In contrast, Lauren Bloom, owner of Bløm Meadworks on 4th Avenue, said all of her employees currently make more than $15 per hour and that it was important for all of her employees to make a livable wage. Bloom said while owners of businesses and restaurants specifically are hurting right now, their servers and employees are hurting just as much.
“I do understand that this is a challenging time for restaurant and service industry owners right now,” Bloom said. “But there’s never going to be a time that’s easy for business owners to make an increase in wages … but just as business owners are struggling, I think service employees are struggling too.”
The federal bill also seeks to eliminate tip credit, which allows businesses to pay employees less than minimum wage if their income is subsidized through consumer tips. Phillis Engelbert owns The Lunch Room and Detroit Filling Station and said she is a staunch supporter of an increased minimum wage. Engelbert estimated that her employees make $17 per hour with tips, and if the tip credit were to be abolished, she would raise the price of products and reform the tip process.
“Restaurants would have to figure out how to pass that price increase on to the consumers, there would be no other way to do it,” Engelbert said. “I think that would have to alter the way tipping happens … maybe tipping would go away altogether and customers would get charged the true cost of the product, including the true cost of the labor.”
In early February, the nonpartisan Congressional Budget Office found that a $15 minimum wage would increase unemployment by 1.4 million workers by 2025, but it also has the potential to lift 900,000 people out of poverty.
It remains to be seen how the bill will fare in Congress. Sen. Kyrsten Sinema, D-Ariz., has said that if a $15 minimum wage is included in the coronavirus relief bill, she will not support it. Sen. Joe Manchin, D-W.Va., has also indicated wariness to support the bill, saying that he would support a minimum wage hike of a lesser amount. Still, Sen. Bernie Sanders, I-Vt., has expressed confidence that Senate Democrats have the votes to pass the bill.
This is not the first time a $15-per-hour minimum wage has been discussed. The activist group Fight for $15 began nearly a decade ago in New York City, and the elevated wage was a crucial element of President Joe Biden’s 2020 campaign platform. Metropolitan hotspots like New York City and Seattle have enacted a $15-per-hour minimum wage in 2014 and 2019, respectively. Additionally, the Democrat-controlled House of Representatives passed a bill in 2019 to raise the minimum wage to $15 per hour, though the bill failed to be heard in the Senate.
The bill is expected to be voted on by the House of Representatives sometime in the next week.
Daily Staff Reporter George Weykamp can be reached at email@example.com.
The COVID-19 pandemic has thrown challenges at all of us — including The Michigan Daily — but that hasn’t stopped our staff. We’re committed to reporting on the issues that matter most to the community where we live, learn and work. Your donations keep our journalism free and independent. You can support our work here.
For a weekly roundup of the best stories from The Michigan Daily, sign up for our newsletter here.