Opinion: Minimum wage increase puts Michigan jobs at risk
Recent passage of legislation in the U.S. House that would raise the minimum wage to $15 puts the jobs of workers in Michigan’s small businesses at risk.
While we can all support the importance of providing increased wages to employees, such increases must be driven by market forces such as worker and business productivity, profitability, and the demand for labor in an open market.
Simply passing legislation that would move the federal minimum wage to more than double the current level, and ultimately phase out the tipped wage, is both reckless and unnecessary, and will be the end for many businesses, especially small ones across Michigan.
Changes in wages should be a negotiation between an employer and employee, not mandated by the government. Artificially increasing business costs will force small businesses to reduce their number of employees, cut hours, or even cease operations. Many people do not realize that skyrocketing the minimum wage will actually cause significant job losses.
In fact, the nonpartisan Congressional Budget Office has estimated that the current legislation could result in a loss of up to 3.7 million jobs! That is 3.7 million people who will go from a steady wage to nothing at all. If you doubt such job loss is possible, I would ask that you consider the increased use of smart phone apps, and point-of-purchase kiosks by businesses. Each app and kiosk is performing a task once provided by an entry-level worker.
Businesses have to be competitive to be successful and small businesses often have to work twice as hard to compete with larger companies. If the minimum wage is mandated to become $15, small businesses would be forced to absorb those costs to try to survive. A compulsory increase in the minimum wage would serve only to reduce the ability of small businesses to operate in a competitive market.
Michigan’s recent economic boom, coupled with historically low unemployment, has already resulted in many small businesses increasing wages and providing new employee benefits to compete for quality talent.
Even a cursory review of state-based job postings shows that market forces are already working to increase wages. Market-driven increases will be more sustainable over the long-term than those compelled by politically motivated legislation.
Small businesses make up the majority of businesses in our state and provide the majority of jobs. Economically dangerous laws like this threaten their very existence. The Michigan Legislature already took action at the end of last year to protect Michigan’s small businesses, enacting an equitable minimum wage increase and paid-sick leave rules. The Michigan Supreme Court is currently reviewing these changes, which help employees without crippling small businesses.
While it seems that decisions in Washington, D.C., continue to be about politics instead of sound policy, I am hopeful that policy development in Michigan continues to be led by facts. It is important that the Michigan Supreme Court uphold the recent revisions to Michigan’s paid sick leave and minimum wage laws so that small businesses and the workers they employ can continue to contribute to our economy.
Implementing a mandate that more than doubles the federal minimum wage, and phases out the tipped wage puts Michigan small business, their employees, and our economic future at risk. That is a risk we simply cannot afford.
David C. Rhoa is the owner of six Michigan-based small businesses headquartered in Kalamazoo and is the past chair of the Small Business Association of Michigan.