The Michigan Legislature approved Legislative Initiated Petition 3, an indirect initiated state statute that will gradually increase the state’s minimum wage over the next four years.
Starting in 2019, the government-mandated wage floor will begin increasing from its current rate of $9.50 an hour to $12.00 in 2022. After 2023, minimum-wage hikes will be tied to changes in the U.S. Bureau of Labor Statistics’ Consumer Price Index.
After a sufficient number of signatures for a ballot initiative are submitted to the Michigan Secretary of State, the legislature has 40 days to enact the proposal or reject it and place the question before voters.
The Secretary of State verified the submission of signatures collected by One Fair Wage Michigan, the state affiliate of a nonprofit organization funded by the Hotel Employees and Restaurant Employees International Union, on August 27, triggering the initiated statute process. The approval by the legislature means the initiative becomes state law. The decision does not require Gov. Rick Snyder’s approval and cannot be vetoed.
The measure, formally known as Public Act 337, will take effect 90 days after the legislature adjourns for the year.
Says Workers Pay the Price
Todd Gabel, a clinical assistant professor at the University of Texas at Arlington and senior fellow with the Fraser Institute, says minimum-wage hikes harm workers instead of helping them. Gabel is also a policy advisor for The Heartland Institute, which publishes Budget & Tax News.
“Any time you increase the minimum wage, the biggest impact will be on the workers themselves,” Gabel said. “It could be a slowdown in hiring, or it could be that the employers are going to cut back on hours for their employees. It could be a cutback in fringe benefits like health insurance.”
The method by which Michigan lawmakers enacted the measure gives them the ability to reverse course, says Gary Wolfram, a professor of economics at Hillsdale College.
“With initiated law, if you want it to pass, you need a three-fourths majority in both houses,” Wolfram said. “If you adopt a law, and you have a majority, you can amend it. A legislator may have voted for a minimum wage they knew they didn’t want, because now it’s a statute, so they can vote to amend it and take it back to where it was.”
Gabel says eliminating or reducing the minimum wage is a truly pro-worker policy.
“I’m a free-market kind of guy,” Gabel said. “I would recommend either a reduction or elimination of the minimum wage. We’ve seen other countries that have been successful with that. Of course, the United States has not always had a minimum wage, and other countries such as Sweden and Germany have other means of helping workers find employment.”
Suggests Free-Market Alternatives
Instead of mandating artificially high prices for labor, Wolfram says improving human capital and reducing the costs of production are the keys to using free-market principles to boost wages.
“You want to allow the markets to work, so lower taxes, reduce regulations, and make it so education is produced the same way cell phones are produced,” Wolfram said. “If you could move to a voucher system where education is produced by the private sector, then you’d increase the quality of education, which would then increase the amount of product people could have.”