• Thu. Nov 24th, 2022

Restaurants: an increase in the minimum wage would be a blow for the industry

ByStephanie M. Akbar

Oct 20, 2022

GRAND RAPIDS, Mich. (WOOD) — If minimum wage increases take effect in February, it would be “devastating” for businesses, according to the Michigan Restaurant and Lodging Association.

News 8 reported Wednesday that Governor Gretchen Whitmer wants to delay Michigan’s impending minimum wage increase, fearing it won’t be sustainable for businesses. Instead, she wants to work with the legislature on a plan to phase in the wage increase.

The minimum wage is supposed to drop from $9.87 to $10.10 an hour in January. In February, it would jump again to $12 per hour. It should increase each year with inflation thereafter.

In 2018, supporters tried to raise the minimum wage to $12 by 2022 by putting it on the ballot. But Republican lawmakers prevented that from happening by jumping and change the law therefore, the increase would not occur until 2030. Over the summer, a Michigan Court of Claims judge ruled the decision unconstitutional. The judge ordered companies to raise the minimum wage to $12 but agreed that the order would not take effect until February because the case is on appeal.

Justin Winslow, president of the Michigan Restaurant and Lodging Association, told News 8 that raising the minimum wage to $12 would be “very quick,” the market has already seen wages rise rapidly over the past two years.

His main concern is the change to remove the tip credit, instead raising tip pay from $3.75 to $9.60 an hour and then to minimum wage by 2024.

“To see that reversed overnight, maybe in February, would be devastating for this industry,” Winslow said. “It would be devastating for any industry to try to adjust to a (more than) 200% increase in its cost of operation overnight. But even more so for this industry after what it has been through the past two years with the pandemic.”

Winslow said he thinks Michigan “needs to keep a tip credit to keep its restaurants going right now.” He said 43 states are operating with tip credit and “it’s working really well.”

If the change goes through in February, Winslow said one in six restaurants would close “forever”.

“That worries us given that we’ve already lost 3,000 restaurants in the pandemic,” Winslow said.

Winslow also said between 40,000 and 60,000 jobs in the industry would be lost “almost overnight”, citing data collected from association members.

Roland Leggett, the Midwest campaigns director for One Fair Wage, the group that led the initiative to vote on the minimum wage in 2018, says the workers need the pay rise.

“We don’t see rising wages keeping up with rising inflation,” Leggett said. “So it’s extremely important that workers get the raise they’ve earned.”

Leggett called the minimum wage increases “meaningful for Michigan workers across the board.” He is counting on the governor to “do the right thing” by supporting the increase in the minimum wage in February.

“When workers are successful, it’s a better place to raise a family, to retire,” he said. “It really creates a much better overall economic picture in Michigan.”

Leggett said millions of workers nationwide are leaving the restaurant industry because of low wages. He believes that the wage increase is necessary to alleviate the labor shortage.

“It is going to be very difficult to convince many workers who have left the industry to come back unless wages reflect the real difficulty of their work,” added Leggett. “I’m confident that by ensuring this well-deserved raise materializes, it would help reverse many of the challenges that many of these companies face in terms of attracting top talent.”

Winslow said most restaurants are already paying more than minimum wage “because that’s what the market is asking to get workers in.” The industry has seen wages increase between 18% and 24% over the past 18 months, Winslow said.

“The market is doing a great job raising wages on its own,” Winslow said.

Ben Stoneman, the owner of Flanagan’s Pub in downtown Grand Rapids, told News 8 he couldn’t get away with paying minimum wage for restaurant workers in today’s market.

“We had to increase what we pay people,” Stoneman said. “And it worked until keeping them.”

He said it was necessary due to strong competition with other companies for workers.

“Most restaurants I know pay well above the minimum now,” he said. “And the servers are earning well above the minimum.”

Still, Leggett said many workers are being left behind.

“We want there to be greater equality between all workers and the means by which they get that base salary, so that restaurant workers don’t rely on tips,” Leggett said.

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