Economy
4:45 pm
Fri February 21, 2014

'Wage erosion' is shrinking paychecks in Michigan, but is hiking the minimum wage the solution?

Michigan’s poorest workers have seen their paychecks shrink as the economy has grown.

A new study claims Michigan workers in the lowest-earning 20% of the workforce are now earning about 55 cents an hour less than they did in 2009, when adjusted for inflation.

Doug Hall authored the study for the Economic Policy Institute, a left-leaning Washington D.C. think tank.

The report finds real wages have fallen in 47 states. Inflation-adjusted wages rose in West Virginia, Mississippi and North Dakota.

He says government policies over the past 30 years have contributed to the problem of wage erosion.

“Leaving it in the hands of the almighty economy is clearly not a recipe for shared prosperity,” says Hall, who adds that increasing the minimum wage would be good, not only for low-income workers but for the broader economy.

“We all benefit as more people are out there spending money instead of struggling to break through the water they are currently under and that ends up being a plus for everybody,” says Hall.

Others argue that a minimum wage increase is not the solution to "wage erosion."

Hughey Newsome is with Project 21, associated with the National Center for Public Policy Research, which describes itself as a conservative think tank. 

“The numbers don’t lie. We have seen wage erosion,” Newsome says.  But he disagrees with the conclusions drawn in the report.  

He contends raising the minimum wage will weaken the economy, which needs to be strong to create better paying jobs.

“You go back to basic economics, where if you raise the price of something, you’ll have less demand for it,” says Newsome. He says instead of increasing the minimum wage, the focus should be on improving the skills of low-wage workers.

There is a national push in Michigan to increase the minimum wage. Michigan voters may even vote on a minimum wage hike in November.