Arlington, Va. – The Employment Policies Institute (EPI) issued a statement urging caution on a new certified ballot measure to increase Michigan’s minimum wage to $15 per hour and eliminate the state’s tip credit. If approved on the ballot in November 2024, this measure would increase the state’s current tipped minimum wage by nearly 300 percent and bring harmful consequences to the state that are already playing out elsewhere in the country.

Research shows the proposal would kill jobs and reduce earnings for Michigan’s tipped employees: Economists from Miami and Trinity Universities find that a $15 minimum wage with tip credit elimination would result in nearly 44,000 jobs lost statewide – including close to 14,000 jobs lost by tipped restaurant and bar employees. They also estimate tip credit elimination alone could cost up to $48 million in employee earnings statewide and up to $6,800 annually for tipped employees’ families.

Rebekah Paxton, director of research at EPI, released the following statement:

“A $15-plus hourly minimum wage paired with eliminating the tip credit has already proven disastrous for employees, most recently in Washington, D.C. where servers and bartenders are already seeing lower tips, customer confusion over service charges, and restaurants projecting potential shutdowns or relocation out of the area. Voters should be wary of how this misguided measure could change the face of businesses and restaurants in Michigan.”

Servers and bartenders have expressed their opposition to a tip credit ban in the state, warning that it would lead to a decrease in tips and employment opportunities. 

The Michigan Supreme Court is set to hear oral arguments soon on a case regarding the legislature’s 2018 action to protect small businesses and their employees from the harmful consequences of a $15 minimum wage and full tip credit elimination. 

BACKGROUND

Research indicates that sharp minimum wage hikes and eliminating tip credits cause job losses, earnings decline, and business closure. Research finds:

• A review of three decades of research on minimum wages finds that 80% of studies estimate minimum wage hikes cause employment loss, especially for younger and lower-educated employees.
• Every $1 increase in the minimum wage increases the likelihood of restaurant closure by 14 percent.
• Every $1 increase in the tipped minimum wage causes 6.1% job loss for tipped restaurant employees. A $15 minimum wage with tip credit elimination could cost 43,568 Michigan employees their jobs. For families of Michigan tipped employees, tip credit elimination could cost them up to $6,874 a year in household earnings.
• As tipped minimum wages are increased, tipping percentages decline. Jurisdictions that have already eliminated the tip credit have some of the lowest tipping percentages in the country.

RESOURCES

• EPI launched ServiceChargeFacts.com to provide clear and concise information about the relationship between service charges and tip credit elimination.
• Read EPI’s tip credit primer to learn more about how the tip credit works and why employees across the country are fighting to preserve it,
• Check out EPI’s April survey of DC restaurant owners about the consequences of tip credit elimination (Initiative 82) in the city, with 86% of respondents expecting the measure to have a negative impact on their operations.