The tip credit, or subminimum wage, in Michigan will not be phased out completely.
Michigan Gov. Gretchen Whitmer signed two bills into law on Friday, Feb. 21, 2025, that made changes to the state’s minimum wage, tipped wage, and sick time laws. The changes made it so the state’s minimum wage would reach $15 a year earlier than planned and halted the subminimum wage phase-out at 50%.
As of Feb. 21, 2025, the state’s minimum wage is $12.48 an hour. On Jan. 1, 2026, it will increase to $13.73 an hour. On Jan. 1, 2027, it will increase to $15 an hour.
As of Feb. 21, 2025, tipped workers earn 38% of the minimum wage and make $4.74 an hour. On Jan. 1, 2027, tipped workers will earn 42% of the minimum wage and make $6.30 an hour.
The subminimum wage was expected to increase to 48% of the minimum wage on Feb. 21, 2025, continue to increase, and then be phased out completely by Feb. 21, 2029. The laws Whitmer signed made it so the subminimum wage remained at 38% in 2025 and will instead increase by 2% each year through Jan. 1, 2031, when it will reach 50%.
---> Full coverage: Here are the changes to Michigan’s minimum wage, tipped wage, sick time laws
Every October beginning in October, 2027, the state treasurer will calculate an adjusted minimum wage rate to increase the minimum wage by the rate of inflation. This will be calculated using the Consumer Price Index for the midwest region. The adjusted minimum wage will be published by Nov. 1 of the year it is calculated and the adjusted minimum wage goes into effect beginning Jan. 1 of the next year.
Why is this happening now?
In 2018, Mothering Justice, Michigan One Fair Wage, Michigan Time to Care sponsored proposals known as the Improved Workforce Opportunity Wage Act (the Wage Act) and the Earned Sick Time Act. They collected enough signatures from Michigan voters to send the proposals to the ballot in the fall of that year.
Instead of allowing these proposals to go to the ballot, Michigan’s Republican-led Legislature preemptively passed the proposals. After the election, in the same Legislative session, they voted to substantially scale back the laws and make changes that were requested by a business lobby that criticized the new requirements.
“In an effort to prevent this ballot proposal from reaching the November 2018 general election ballot, the Michigan Restaurant and Lodging Association worked tirelessly with the Michigan legislature to have them adopt the MI One Fair Wage Ballot Proposal and prevent it from going to the ballot,” the Michigan Restaurant and Lodging Association states on its website. “As demonstrated in other states, if the MI One Fair Wage ballot proposal had gone to the November 2018 General Election Ballot, it would have passed with overwhelming support.”
In July 2024, the Michigan Supreme Court ruled that it was unconstitutional for the Legislature to adopt-and-amend citizen-initiated petitions. This means the minimum wage and sick time laws, as originally adopted, will be reinstated.
The Supreme Court decision made it so Michigan’s reinstated Wage Act and the Earned Sick Time Act were supposed to go into effect on Friday, Feb. 21, 2025. Lawmakers on both sides of the aisle ensured that didn’t happen.
---> Polling shows where Michigan voters stand on minimum wage ruling, tipping habits
Group working to block changes
On Thursday, Feb. 20, 2025, One Fair Wage announced plans for a statewide referendum in response to Senate Bill 8.
According to a press release, if the group gathers the number of signatures from registered voters within the legal timeframe, Senate Bill 8 would be suspended and placed on the ballot for a statewide vote. This would prevent it from taking effect unless voters approved it.
“The Michigan Supreme Court ruled that these wage increases should be implemented, yet lawmakers are attempting to roll them back before they even take effect,” said Saru Jayaraman, President of One Fair Wage. “We’re mobilizing to ensure voters—not politicians—have the ultimate say in whether these protections are upheld.”
Other states without subminimum wage
There are already seven states that require employers to pay tipped employees the full state minimum wage before they receive tips. Those states are Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington.
One Fair Wage states that, “these seven states have higher restaurant job growth rates, small business growth rates, and tipping averages than Michigan; they also have one half the rate of sexual harassment in the restaurant industry and lost fewer restaurants during the pandemic than Michigan.”
