Federal minimum wage increase a step in the right direction

Increasing the federal minimum wage could have a positive impact on the maximum weekly compensation rate in Michigan.

President Obama announced in his State of the Union address that he will issue an executive order to raise the federal minimum wage for government contract workers. This would require businesses awarded federal contracts to pay $10.10 per hour up from $7.25.

This is wonderful news and President Obama should be applauded for his leadership. Our hope is that Congress will take steps to increase the minimum wage for everyone. Americans must be paid a living wage.

Increasing the federal minimum wage could also have a positive impact on the maximum weekly compensation rate in Michigan. Here is what you need to know about calculating your workers compensation benefits.

Maximum weekly compensation rate in Michigan

Lost wages under workers compensation are supposed to equal 80% of an individual’s after-tax average weekly wage. However, this amount is capped at 90% of the state-wide average weekly wage.

The idea is to limit workers compensation payments to what most employees in Michigan are earning. This means high wage earners are stuck with an arbitrary maximum regardless of their income. Not exactly a fair deal.

Increasing the federal minimum wage could result in a higher state-wide average weekly wage. This means potentially greater weekly benefits even if a person’s salary stayed the same.

Some numbers to give perspective

The 2014 maximum weekly compensation rate is $805.00 based on a state average weekly wage of $893.44. It does not matter if you are a professional football player or a neurosurgeon. You are stuck with a maximum of $41,860.00 per year in total wage loss benefits.

Individuals with low paying jobs are even worse off. The current minimum wage is $7.25 per hour. Working 40 hours per week would mean an average of $290.00. For a single person with no dependents, he or she would only be entitled to $196.56 per week or $10,221.12 per year. Throw in a reduction for potential “wage earning capacity” and these individuals might get $0.00 per week.

To speak with one of our workers compensation lawyers in Michigan, call (855) 221-2667 for a free consultation.

Alex Berman is the founder of Michigan Workers Comp Lawyers. He’s been representing injured and disabled workers exclusively for more than 35 years. Alex has helped countless people obtain workers compensation benefits and never charges a fee to evaluate a case.

Related information:

Disabled workers paid pennies despite federal minimum wage

Photo courtesy of Creative Commons, by 401(K) 2013.

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