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'I would eat the cost': Restaurant owner prepares for tip wage increase

We have a tip for workers in the state. Many are going to see pay bumps. Tipped employees are going to see the biggest jumps. Matt Witkos sat down with a local business to see what this might mean as they work to fight already-rising costs.

By: Matt Witkos

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GRAND RAPIDS, Mich. — The Michigan Supreme Court's ruling on minimum wage will have a major impact on the service industry, which relies on tips.

Businesses will now look at how to deal with the added cost to the bottom line.

"My restaurants, about 5% to 6% of my total labor market is comprised of bartenders or servers or front of the house. So that might spike it up to 6% to 8%," Garage Bar Owner Kevin Farhat told FOX 17.

Farhat explains that, between the three bars he owns, he has around 90 workers whose primary income relies on tips.

Michigan's current minimum tipped wage is $3.96 per hour.

The court's ruling will increase that to just under $6 per hour starting next year.

"We will continue to phase out the tipped wage earners, lower minimum wage. So that one's big and it's significant," Cooley Law School Prof. Mike McDaniel said.

Businesses expect to see those raises cut into operating costs.

"It's gonna cut into my margins a little bit," Farhat said. "I would eat the cost. I mean, it's tough for people to go out and eat. As an operator, I feel like I do fine."

By 2029, in Michigan, tipped minimum wage will no longer exist.

"The law itself, that had the scaled increase," McDaniel said.

Farhat explains that he's fine with that.

"I feel blessed that it's going to take care of those that need it," Farhat said. "How much it costs to buy food these days, [they're] paying rent or making the car payment, insurance payment, things like that. But I think it'll benefit everybody."