Michigan’s minimum wage will increase by 10% starting Jan. 1.
The jump from the current minimum wage of $12.48 an hour to $13.73 an hour is the second in a series of increases that will eventually see the state’s minimum wage tied to inflation.
The changes stem from Michigan’s Improved Workforce Opportunity Wage Act enacted earlier this year. The act was a compromise between the Democratic-controlled Senate and Republican-controlled House to prevent tipped workers from becoming minimum wage workers.
Here are four things to know about the minimum wage increase and changes.
The Jan. 1 increases
The state’s standard minimum wage will become $13.73 an hour, up from the current $12.48 an hour, at the start of the new year.
Tipped employees will also see their base pay increase to $5.49 an hour on Jan. 1, up from the current $4.74 an hour. If a tipped worker’s base pay plus tips doesn’t add up to the minimum wage, their employer makes up the difference.
The 85% minimum wage rate for minors ages 16 and 17 will increase from $10.60 an hour to $11.67 an hour as well.
More increases to come
Under the Improved Workforce Opportunity Wage Act, the minimum wage will reach $15 an hour in 2027 and then increase each year based on inflation.
The base pay for tipped workers will increase from the current 38% of the minimum wage to 40% starting in 2026. After that, it will increase by 2% each year until it reaches 50% of the minimum wage in 2031.
The 85% minimum wage rate for minors will remain at 85%.
The compromise
The Improved Workforce Opportunity Wage Act was a last-minute compromise by the state’s dividied Legislature to thwart tipped workers from becoming minimum wage workers.
Without the compromise by lawmakers, tipped workers were slated to receive 100% of the minimum wage as base pay by 2030. The minimum wage would’ve reached $14.97 in 2028 before continuing to increase each year based on inflation.
Lawmakers decided to expedite the minimum wage hike to $15 by one year but increase and cap the percentage of minimum wage that servers earn. The changes blocked by lawmakers stemmed from a Michigan Supreme Court ruling in 2024.
The first minimum wage increase under the act took place earlier this year, on Feb. 21, when the state’s minimum wage jumped 18%, from $10.56 an hour to $12.48.
The tipped wages debate
Republicans and numerous service industry workers and restaurant owners had warned that phasing out the subminimum wage for tipped workers would put jobs and businesses at risk due to increased wage costs for servers.
They also argued it would’ve driven up prices for customers and resulted in people tipping less and lower take-home pay for servers.
Proponents of the change said removing the subminimum wage would’ve given tipped workers a more stable income and wouldn’t have decreased their earnings or the amount that people tip.
The July 2024 ruling by the Michigan Supreme Court that mandated changes to minimum wage, tipped wages and sick leave laws stemmed from a dispute over two ballot initiatives adopted by the state Legislature in 2018.
The two initiatives, called the Michigan Paid Sick Leave Initiative and the Michigan Minimum Wage Increase Initiative, aimed to raise the minimum wage, end the subminimum wage for tipped workers system and expand paid sick leave.
The Republican-controlled state Legislature at the time adopted the initiatives and then gutted them in the same session. Because the Michigan Legislature adopted the initiatives, they were never put on the ballot for a public vote.
The Michigan Supreme Court ruled the “adopt and amend” tactic by lawmakers was unconstitutional and therefore the ballot initiatives must be adopted into law as written.
Lawmakers were allowed to revise the sweeping changes mandated by the Michigan Supreme Court and did so with the Improved Workforce Opportunity Wage Act.
