Increasing the state’s minimum wage would move some workers out of poverty, and increase economic activity and even state tax revenues, a study from the Illinois Economic Policy Institute concluded.
The study, done in conjunction with the University of Illinois’ Project for Middle Class Renewal, said that if Illinois’ minimum wage of $8.25 an hour had been indexed to inflation when it was set in 2010, it would be at nearly $10 an hour now.
“By raising the minimum wage, Illinois can boost worker incomes, reduce income inequality, increase consumer spending, grow the economy, generate tax revenues, and decrease taxpayer costs for government assistance programs,” the study said.
“A lot of people don’t recognize that raising the minimum wage saves taxpayers money,” said Frank Manzo IV, policy director for the ILEPI. “By raising the minimum wage, you can reduce working poverty by a significant amount.”
Manzo noted that both Gov. Bruce Rauner and Democrat J.B. Pritzker have expressed support for increasing the state’s minimum wage, albeit to different levels. Rauner has indicated support for gradually raising it to $10 an hour over several years, while Pritzker has supported a $15 an hour minimum wage.
The study examined the effects of raising the wage to $10, $13 and $15 an hour. At $10 an hour, it said, the increase would affect 353,000 workers, most of them women. It determined that would grow the economy by more than $5 billion a year, generate $30 million in state income and sales taxes and take 35,000 people off the poverty rolls. The study assumed the increase would take effect next year.
A $15 an hour wage would directly affect 1.4 million low-income workers, the study said, nearly a quarter of the state’s workforce. It would generate $19 billion in economic activity, $380 million in new state tax revenue and save government $87 million in food stamp outlays.
There are currently 13 states that have a minimum wage of $10 an hour or more. The highest is Washington state, at $11.50. The study notes that the unemployment rate in those states varies, with some below Illinois’ rate of 4.3 percent when the study was done and some above. The highest unemployment rate was 4.9 percent in Arizona, where the minimum wage is $10.50.
Critics of raising the minimum wage said it will result in job losses or fewer hours for low-income workers. The study looked at the city of Chicago where the minimum wage increased to $12 an hour as part of a process to gradually raise it to $13 an hour.
“As they have phased in their minimum wage increase, the unemployment rate has not increased by more than surrounding suburbs that did not raise their minimum wage,” Manzo said. “Employment growth is statistically the same for the city of Chicago as it is for the suburbs.”
Illinois Chamber of Commerce president Todd Maisch said he isn’t surprised by the findings of the ILEPI.
“The group is very biased from the get-go, so it’s not a neutral organization,” Maisch said. “They have long advocated for an increase in the minimum wage.”
The ILEPI is a nonprofit whose board includes the head of Operating Engineers Local 150, a former road contractor, and two former lawmakers among others. The organization says it provides economic analysis for Illinois and the Midwest “specializing in the construction industry.”
Maisch said looking at jobs numbers between Chicago and its suburbs might not show the entire picture.
“What is difficult about the minimum wage issue is that it’s almost impossible to count the jobs that didn’t get created and that is the real loss that happens when there is an artificial floor under wage rates,” he said. “All you’ve got to do is look at the teenage unemployment rate in Chicago and know that something is the matter.”
That something, Maisch said, likely is tied to employers not wanting to pay Chicago’s minimum wage to kids with minimal skills.
Last year, lawmakers approved a bill gradually raising the state’s minimum wage to $15 an hour. Rauner vetoed the bill and lawmakers did not override the veto.
Contact Doug Finke: firstname.lastname@example.org, 788-1527, twitter.com/dougfinkesjr