Minimum wage hike must wait

Unemployment rate keeps 2021 escalator from kicking in.
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Although no one really knows what the next 12 months may bring, there is one thing that Michiganders don’t have to speculate about: the increase in the minimum wage.

The minimum wage will remain the same as it was in 2020 — $9.65 — despite the state’s Improved Workforce Opportunity Wage Act that instituted a gradual increase in minimum wages until 2030, when it was poised to become $12.05. This year, the minimum wage was supposed to be $9.87.

However, the deadly COVID-19 pandemic became a hinderance to the annual minimum-wage increase as the legislation “prohibits scheduled minimum wage increases when the state’s annual unemployment rate for the preceding calendar year is above 8.5%.”

From January through October, the state’s unemployment rate was at 10.2%. In the month of November, it was preliminarily reported by the U.S. Bureau of Labor and Statistics to be 6.95%. The high mark for the year was 24% in April, according to the Labor Bureau. The lowest rate for 2020 was in October at 6.1%.

Although the unemployment rate has been on the decline, Clifford Hammond, an employment and labor attorney at Foster Swift Collins & Smith PC, said there needs to be a consistent 12-month pattern showing significant unemployment rate decreases for the hike to kick in.

“Looking forward, based on what we’ve seen over the course of the year, 8.5% would just signal that we are not in a position financially to really pressure those low-wage jobs and those smaller businesses that had to weather that type of economy,” he said.

The pandemic forced many businesses to close permanently or file for bankruptcy and thousands of employees were laid off or furloughed.

With the minimum wage remaining the same at $9.65, wages will presumably increase to $9.87 in 2022, pushing back the expected $12.05 per hour minimum wage to 2031.

According to the Improved Workforce Opportunity Wage Act, the increases per calendar year are:

  • 2022: $9.87
  • 2023: $10.10
  • 2024: $10:33
  • 2025: $10.56
  • 2026: $10.80
  • 2027: $11.04
  • 2028: $11.29
  • 2029: $11.54
  • 2030: $11.79
  • 2031: $12.05

However, there is no way to know if that is the track the increase in wages will take.

“We never know how long we’ll recover,” Hammond said. “Some businesses never come back, or they’ll never be what they were. It could take decades or one month. It all depends on who you are. The restaurant industry, how long will it take for the restaurant industry to come back? We don’t know. What will the long-term future of tourism, hotels, lodging, and the auto industries look like? There are a lot of variables. They could just take off because of unknown factors that come up, or they could drop or stay stagnant. We just don’t know. We know in this state, in Michigan, there are some segments of the economy that have been able to weather the industrial decline.”

If there is hope for an improved unemployment rate and businesses reopening, it might be in a relief bill that Gov. Gretchen Whitmer signed in late December, which includes “$55 million to help small businesses impacted by COVID-19. Grants of up to $20,000 will be made available to small businesses across the state that need support this winter. The relief bill also includes $3.5 million for grants of up to $40,000 each for live music and entertainment venues and $45 million in direct payments to workers who have been laid off or furloughed as a result of the virus.”

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