Last week, the Michigan Senate passed a bipartisan bill 24-14 to raise Michigan’s minimum wage from the current $7.40 to $9.20 per hour. The bill also proposes to increase tipped employees’ wages from $2.65 to $3.50 per hour and tie future minimum wage increases to the level of inflation. The bill has now moved to the state House but not without opposition. Some dissenters claim the increase should be more gradual while others assert the bill doesn’t do enough to help the working class. Raising the minimum wage will undoubtedly increase individuals’ quality of life. Republican Gov. Rick Snyder and the House should support the legislation. However, the state must also take action to counter any negative effects associated with minimum wage increases.
If passed by the rest of the Michigan legislature, the bill would tie minimum wage to inflation. Since the minimum wage isn’t currently adjusted to inflation, workers earning the same salary can afford less each year. This causes fluctuations in the real value of wages. Adjusting for inflation, the 1968 minimum wage was $10.69 and $6.94 in 2008, so this increase is not unprecedented as many politicians have suggested, and is in fact in line with historical precedents.
Opponents of minimum wage increases often cite the model of supply and demand, which predicts that increasing the price of labor causes unemployment. This model, however, simplifies several realities of the American economy. Many people, including distinguished economists, believe our complex market fails to meet the conditions required to allow the supply and demand model to accurately predict the effects of a minimum wage increase on the labor market. The model requires many factors to be held constant, however, our economy is highly complicated and ever-evolving, failing to meet the conditions required of a perfectly modeled economy. Scholars and government officials should increase economic research, continuously monitor the economic impact of the wage increase after its implementation and adjust long-term policies as necessary.
To ensure access to higher paying jobs, Michigan needs to provide more educational opportunities for workers. Increases in education levels significantly affect qualifications and earning ability. Statistics from the U.S. Department of Labor show 31 percent of minimum wage workers only obtained a high school diploma. Likewise, individuals with only some college constitute 28 percent of the minimum wage work force. However, one doesn’t necessarily need to obtain a college degree if they wish to boost their earnings. In fact, the percentage of minimum wage workers drastically decreases to 5.1 percent for those with an associate’s degree and to 2.2 percent for workers who complete some form of trade school or occupational programs. Such programs may do more to alleviate poverty for both current and future workers.