Michigan small businesses are grappling with the impending rollout of new minimum wage and sick leave requirements, set to take effect in February. Restaurants, cafes and other service sector businesses are preparing to adapt to the changes while confronting the financial realities that they bring.

Griselda Mata, owner of Lindo Mexico Restaurante Mexicano in Grand Rapids, is just one of the people at the forefront of these adjustments. Her family restaurant has been in business in Grand Rapids for more than 20 years, she said the upcoming laws worry her. Mata said that after attending an informational webinar with the Michigan Restaurant and Lodging Association, she panicked when she learned of the likely additional costs to her business.

“When I read that,” Mata said, “I asked myself how did I not know more? How did I miss this, basically.

Michelle Jokisch Polo

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WKAR

Under the new rules, Michigan’s minimum wage will increase to about $13 an hour. The tipped wage will increase to about $6 an hour, and increase over the next five years to phase out the tip credit. Companies will also need to offer paid sick leave to all employees, whether they work full-time or not.

Mata said she already pays her non-working staff at least $15 an hour, but she worries about the added strain these laws will put on her business. She estimates she will need to find nearly $50,000 next year to meet new demands.

“Restaurants right now…our profits are almost non-existent,” Mata said. “So I have to figure out how I’m going to find this extra money that I have to pay.”

Megan Schellong

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WKAR-MSU

The new regulations date 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.

Political maneuvering has resulted in watered-down versions of the original proposals. After years of legal battles, the Michigan Supreme Court ruled in July that these “adopt and amend” strategies were unconstitutional. This means the original laws will come into effect on February 21, 2024.

Sen. Thomas Albert, who opposed the wage hike in 2018, introduced a bill in September that would keep current wage and sick leave rules intact. Albert said increased costs for small businesses would result in fewer entry-level jobs, especially for younger workers in the restaurant industry.

“I would say free markets work. If you feel like you can offer a service or type of product and you’re not getting paid enough at the moment, offer it elsewhere. Move the jobs,” Albert said.

While some in the service sector, like Mata, worry about the financial burden, others see it as an 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 pay rent means they’ll stay longer,” Nader said.

Nader, who said she already pays her employees $15 an hour and offers them sick leave, plans to gradually raise her prices to accommodate the new costs. She said this, alongside increasing efficiency in the workplace, should be something businesses implement every year.

“A lot of companies are still hesitant to do this,” Nader said. “They think all the customers will notice and leave. Customers know that the costs of things have increased.

In the service industry, many businesses pay part of their servers’ salaries and rely on tips from customers to make up the rest.

“What you might end up seeing,” said Scott Imberman, an economics professor at Michigan State University, “is like a change in the way money flows.”

Imberman said the new laws could ultimately reshape how companies pay their employees, especially in industries that traditionally rely on tips. He said he expects the overall economic impact to be small and its onset to be gradual, but he also predicts that companies will develop smart strategies to offset losses.

“I wouldn’t be surprised to see a lot more restaurants and hotels and places like that charging a service fee in order to, you know, give people an idea.”

With four months until the new laws take effect, Michigan businesses must decide how to handle the changes — and decide whether they view them as a necessary step toward workers’ rights or a crushing financial burden.