State lawmakers last week reached an 11th-hour deal to preserve a lower minimum wage for workers who earn tips. Why it matters: The agreement satisfied restaurant owners opposed to paying planned wage hikes and settled a years-long battle over how much the minimum wage will increase in the coming years.

The tip credit, or 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% and will instead increase by 2% each year through Jan. 1, 2031, when it will reach 50%.

More than six years ago, committees gathered enough petition signatures to put minimum wage and sick leave proposals on the ballot in November 2018. However, Republican lawmakers adopted the measures before Election Day, keeping them off the ballot, and then returned after Election Day to significantly weaken the requirements.

Changes have been made to Michigan’s minimum wage, tipped wage, and sick time laws. Two bills to amend Michigan’s minimum wage, tipped wage, and sick time laws were signed into law by Michigan Gov. Gretchen Whitmer on Friday, Feb. 21, 2025. The bills go into effect immediately and are retroactive.

As part of a phased-in increase, the state's minimum wage will eventually increase to $15 an hour in the coming years.

Bills based on voter initiatives would have phased out use of a sub-minimum wage for tipped workers. A last-minute compromise kept the tip

Democratic Gov. Gretchen Whitmer has signed a compromise that scales back paid sick leave and wages for tipped workers in an effort to appease businesses following a minimum wage hike.