Minimum wage workers in Michigan will get a raise of $1.80 beginning in October, after Gov. Jennifer Granholm signed a bill Tuesday guaranteeing the increase for low-wage workers.
Following the initial increase in October to $6.95 per hour, the minimum wage will be raised to $7.15 beginning July 1, 2007, and then to $7.40 on July 1, 2008.
"This is a simple matter of fairness — anyone who puts in a fair day's work should receive a fair day's pay," Granholm said in a press release. "Increasing the minimum wage for the first time in nine years is a critical step to ensuring that every worker receives a fair day's pay."
An increase was necessary because the minimum wage had fallen behind the cost of living in the nine years since it was last increased, said the bill's primary sponsor, Sen. Ray Basham, D-Taylor, after it unanimously passed the Senate earlier this month.
However, opponents of the bill see it as potentially damaging to Michigan's already stagnant economy. Michigan's unemployment rate rose to 6.6 percent in February, which is higher than the national rate of 4.8 percent.
Raising the minimum wage will hurt job growth in Michigan, said Paul Bukowski, director of political affairs for the Small Business Association of Michigan.
"It's simple economics. When someone is going to increase your costs, it's going to have an adverse affect on your business," Bukowski said. "It will either make (businesses) cut jobs or not hire new ones."
Michigan's consumers could also feel the effect of a minimum wage increase, Bukowski said.
"Whether it is a business tax or a wage increase, the consumer ultimately pays for it," Bukowski said.
He said most businesses already pay their employees more than the minimum wage because of certain market factors, such as trying to attract better employees.
"It is an entry-level wage," Bukowski said. "It's not a wage you're expected to raise a family on. It is not one that you should be expected to remain on for a long time."
MSU economics Professor Charles Ballard said most of Michigan's citizens will not notice a significant change due to the wage increase because they already make a wage that is higher than $7.40.
The people it would affect are those who currently work at minimum wage or for less than it will be after the increase, Ballard said. While most of these people would see the benefit of making more money, some could lose their jobs, although how many is unclear.
"There is a big controversy among economists about how many people it would affect," Ballard said. "Most estimates indicate that it is not a big effect, which is a good thing."
Ballard said the estimated impact is that an increase of around 10 percent would equal a decrease in employment of 1 percent or less for those earning below the new minimum wage. By 2008, the minimum wage will increase by about 40 percent, which could mean a small percent decrease in available minimum wage jobs, Ballard said.
