Small businesses across Michigan are grappling with the pending rollout of new minimum wage and sick leave requirements, set to take effect in February. Restaurants, cafés and other service industry businesses are preparing to adapt to the changes while navigating the financial realities they bring.
Gricelda Mata, owner of Lindo Mexico Restaurante Mexicano in Grand Rapids, is just one of the people at the forefront of these adjustments. Her family-owned restaurant has been operating in Grand Rapids for over 20 years, she said the upcoming laws have her concerned. Mata said after attending an informational webinar with the Michigan Restaurant and Lodging association, she panicked upon learning likely additional costs to her business.
“When I read about it,” Mata said, “I was like how did I not know more about this? How did I miss this, basically.”
Under the new rules, Michigan’s minimum wage will rise to approximately $13 per hour. The tipped wage will increase to around $6 per hour, increasing over the next five years to completely phase out the tipping credit. Businesses will also need to offer paid sick leave to all their employees, regardless of whether they’re full-time or not.
Mata said she already pays her non-serving staff at least $15 an hour and tipped staff a
minimum of $4 an hour but worries about the added strain these laws will place on her business. She estimates she’ll need to find nearly $50,000 next year to meet the new demands.
“Restaurants right now... our profits are almost nonexistent,” Mata said. “So, I have to figure out how I am going to come up with that additional money that I have to pay.”
The new regulations trace back to 2018, when Michigan’s Republican-controlled legislature passed and then amended two voter-initiated proposals that would have raised the minimum wage and expanded sick leave.
The political maneuvering created watered-down versions of the original proposals. After years of legal battles, the Michigan Supreme Court ruled in July that those "adopt and amend" strategies were unconstitutional. This means the original laws will take effect on Feb. 21, 2024.
Senator Thomas Albert, who opposed the wage hike back in 2018, introduced legislation in September that would keep current wages and sick leave rules intact. Albert said increasing costs for small businesses will result in fewer entry-level jobs, particularly for young workers in the food service industry.
“I would say free markets work. If you feel like you can offer a service or some type of product and you’re not getting paid enough right now, then offer it at a different place. Move jobs,” Albert said.
While some in the service industry, like Mata, worry about the financial burden, others see opportunity.
Cara Nader has owned Strange Matter Coffee in Lansing for nearly a decade. She said wage increases and sick leave provisions could help foster a more stable workforce.
“Making sure my employees can afford to eat and afford to pay rent means they’ll stay longer,” Nader said.
Nader, who said she already pays her employees $15 per hour and offers sick leave, plans to raise her prices incrementally to adjust for the new costs. She said this, along with increasing efficiency in the workplace, should be something businesses implement annually.
“A lot of businesses are always hesitant to do that,” Nader said. “They think all the customers will notice and will go away. Customers know that costs of things have increased.”
When it comes to the service industry, many businesses pay a portion of their servers’ wages and rely on customer tips to make up for the rest.
“What you might just end up seeing,” Michigan State University economics professor Scott Imberman said, “is, like a change in how the money moves.”
Imberman said the new laws could ultimately reshape how businesses compensate employees, especially in industries that have traditionally relied on tipping. He said he expects the overall economic impact to be small and its onset to be gradual, but he also predicts businesses will develop clever strategies to make up for losses.
“I would not be surprised to see a lot more restaurants and hotels and places like that to do service charges as a way to, you know, clue in people.”
With four months to go before the new laws take effect, Michigan businesses are left to decide how to navigate the changes – and to decide whether they see them as a necessary step towards worker rights or an overwhelming financial burden.
