Michigan minimum wage to increase Jan. 1

More than two dozen states are set to raise their minimum wages through the new year.

GRAND RAPIDS, Mich — Workers in the U.S. earning minimum wage can expect a raise starting Wednesday, Jan. 1.

According to the Labor Law Center, more than two dozen states are set to raise their minimum wage at various points through the new year — including Michigan. 

Michigan is expected to raise minimum wage 20 cents, making it $9.65. The state will also raise hourly and tipped workers' wages to $3.67, an eight-cent increase from 2019.

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The federal minimum wage remains unchanged at $7.25. It was last raised back in 2009. 

Dr. Paul Isely, professor of economics and associate dean of Seidman College of Business at Grand Valley State University, said the 2020 increase won't be a make-or-break change.

"The scope of things that can help a little bit, but it’s not going to change things drastically...It’s going to make it a little easier, but it’s only going to be keeping up with inflation," Isely said.

He said youth and young adults will be most impacted by the increase with around 50% of minimum wage workers being, "under the age of 19," and added that service industries would be the businesses most affected because production and other industries have upped their wages to around $12 per hour in the last year to compete for workers.

According to the Michigan Association of United Ways, a single adult needs to earn $10.52 per hour to makes ends meet, while a family of four needs $30.64 an hour.

Isely said for people on the lower end of income, the wage raise may only keep them afloat amidst the growing inflation.

"Inflation for people who are in the bottom 20% or income earners, bottom 30% of income earners, is actually higher than the inflation that those of us who aren’t in that group are feeling, because a larger chunk of their income is on houses, on food, on clothing and those are places where we’ve seen increases on prices," he explained.

While Isely said most economic studies show there's room for an even higher minimum wage in Michigan, he added there are dangers of dramatically raising wages over a short period of time.

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"If you were to go to $16-17 an hour there would be massive effects on the number of people employed. There’s a trade-off — as you increase the minimum wage, that increases the inflation on everyone else, so firms have to charge more money to pay those wages," Isley said. "One of the things we look at is are we increasing the wages so much that we are no longer competitive? Meaning it might be cheaper to now use a machine instead of using people, or it might be cheaper to bring in people from overseas."

State websites show plans to increase the minimum wage again in 2021 to $9.87 for hourly employees and $3.75 for tipped, hourly workers.

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