Why is Senate Majority Leader Randy Richardville, a Republican, backing a state-imposed minimum wage hike? (Dale G. Young / The Detroit News)
The Republican-led Michigan Senate last week passed a measure to raise the stateís minimum hourly wage from $7.40 to $9.20 by 2017, and index future wages to inflation.
Senate Majority Leader Randy Richardville acknowledged the bill is intended to preempt a petition to get a $10.10 wage hike on the November ballot.
But accepting the bad to avoid the worse is an irresponsible way to establish policy. Itís easy to spend other peopleís money, and thatís just what the Senate would impose on Michigan businesses.
The bill proposes to raise the hourly rate incrementally over three years.
But by artificially increasing the annual cost of labor, without corresponding raises in productivity or prices, the impact of this legislation could crush small- and mid-sized businesses, and eliminate jobs at larger ones. It also would take away the ability of employers to freeze wages in an economically stressful year, leaving layoffs as the only option to control payroll costs.
The mandatory wage hike forces businesses to take on cost whether or not they can afford it ó including restaurants and other businesses with tipped workers.
This will mean fewer opportunities, particularly for Michiganís most vulnerable residents.
According to the Michigan Chamber of Commerce, a business with 40 full-time minimum wage workers would face extra costs of approximately $160,000 per year in payroll expenses, plus higher state and federal unemployment taxes, payroll taxes and workersí compensation fees.
Teenagers overwhelmingly seek the entry-level, minimum wage jobs this proposal will put at risk.
With teen unemployment at near historic highs, this proposal will dim their prospects even further. Despite a recovering economy, the teen unemployment rate in Michigan rose to 23.8 percent in 2013 from 21.5 percent in 2012. That follows a series of previously adopted hikes in the minimum wage.
For the relatively low number of families headed by minimum wage earners, the increase in income will be offset by a spike in prices, as costs for food and other basic necessities rise.
Michiganís economy is improving, but not at such a vigorous rate to risk policies that may impact employment. The state should continue to focus on policies that spur growth and increase the demand for labor.
As the bill, which would make Michigan among the highest minimum wage states, moves to the House for consideration, lawmakers must consider that the Senateís proposal is just one stop shy of the $10.10 the Raise Michigan Coalition wants to see on the November ballot.
A better response would be to make the case to the public that this is a harmful proposal that will make Michigan less competitive and decrease job opportunities.
At a minimum, the House must strip out indexing wages to inflation. A better approach would be to work with economists to determine what sort of minimum wage hike the stateís economy can tolerate, if any.
As it is, the Senate bill isnít much better than the alternative of allowing the issue to go to the ballot.