Minimum wage delay—what is it good for? Wolfers adds perspective

December 10, 2018

In an attempt to forestall a citizen-led initiative to raise the state’s minimum wage, Michigan GOP legislators approved a gradual increase that would get the state to a $12-minimum in 2022. However, during this lame duck session, they instead advanced a bill to stagger the increase, with the $12 goal being delayed until 2030. To help make sense of what this means for Michigan workers and employers Dustin Walsh of Crain’s Detroit Business consulted Professor Justin Wolfers for his December 2, 2018, article “Wage growth, competition likely to render minimum wage delay moot.” What workers will benefit? Well, not many, Wolfers warns by saying “it's accurate to say that it'll probably help fewer people than the current Michigan minimum wage helps."

Not only did the republican-controlled Senate vote to delay the increase, but they also capped the minimum wage for tipped workers—the previous bill said their wage would match that of other minimum wage work—and exempted small businesses from providing paid sick leave. The repeals of September’s agreements were done, they say, in the name of keeping small business alive, with many commenters stating that having a standard minimum wage doesn’t make sense when the cost of living in Michigan varies so drastically across the state. 

But seeing as current statistics show many minimum wage workers, including teenagers and tipped workers, don’t make the state-mandated minimum wage currently, how will this impact them?, With many of those workers already in vulnerable positions, any increase will be welcome. Wolfers, who in the article projects a wage growth of 3 percent annually, says accounting for that, minimum wage workers should expect to make around $12.80 by 2030. That’s $0.80 more than what this legislation plans for ($12 minimum wage by 2030), but it puts people far behind the original plan of getting them to $12 by 2022. "My guess is that this (population) is a large enough — and needy enough — group,” said Wolfers, “that it would be an overstatement to say that the $12 minimum wage in 2030 will help no one.” 

Read the full article on Crain's Detroit Business.

Justin Wolfers is a professor of public policy and economics. He also serves as a member of the Congressional Budget Office Panel of Economic Advisers. Wolfers' research interests include labor economics, macroeconomics, political economy, social policy, law and economics, and behavioral economics.