Illinois’ $15-per-hour Minimum Wage Proposal Is Just ‘Pie in the Sky’

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With the multitude of financial problems facing Illinois, legislators still had time to pass a $15 minimum wage bill now on Rauner’s desk following the Senate’s approval on May 31, 2017.

Presently Illinois is facing junk bond status and is in danger of entering a financial death spiral, with an unpaid backlog of bills now $14.6 billion and growing.  Illinois also has the worst pension crisis in the nation.  Junk status for Illinois would increase the cost of borrowing, worsening the deficit and making it even harder for taxpayers to dig out of the hole. Illinois is even late in paying utilities bills for its own capitol city of Springfield.

Just one day from now, on July 1, which marks the beginning of the next fiscal year, billions of dollars in road projects are scheduled to grind to a halt. On Wednesday of this week, June 28, Rauner even threatened to keep the IL General Assembly in extended special session if the legislature fails to send a balanced budget package to his desk by today.

A Pie in the Sky Idea?

Illinois’ legislators proposed a $15 per-hour minimum wage bill, to be realized by 2022, under the assumption that it would benefit workers at jobs that were never meant for heads of households in the first place, but instead were often entry level job for teens.

Did it ever occur to lawmakers that the unfunded mandate would mostly be imposed upon small businesses, that the wage increase would set into motion a push to raise the wages of others who were at or near to the $15-per-hour wage level, and that if businesses are unable to find money in their budget to pay for the wage hikes, robots, which don’t have to paid either benefits or salaries, will take the place of humans?

The $15 Minimum Wage movement had its fourth anniversary on November 29, 2016.  On this anniversary thousands of Fight for 15 supporters calling for a fairer minimum wage, marched, sat in and got arrested in 340 cities across the nation, including Chicago.

At first the Fight for 15 movement was all about fast-food workers, but it has now expanded to include airport workers, childcare workers, adjunct professors and more, making the movement one of the nation’s largest progressive movements alongside movements by undocumented immigrants, Black Lives Matter and environmental activists fighting global warming.

House and Senate pass bill $15 minimum wage bill

The Illinois House passed a bill on May 30, 2017, on a vote of 61-53, that over five years increases Illinois’ minimum wage to $15 an hour in 2012.  Illinois’ current $8.25 minimum wage is more than the federally mandated $7.25 an hour.   Here’s how the House voted on Senate Bill 81.   Rep. Will Guzzardi, D-Chicago, in sponsoring Senate Bill 81, noted how Illinois residents should have a wage they can live on.

A day after the House passed its $15 minimum wage bill, the Senate followedsuit on May 31, with its proposal to raise the state’s minimum wage of $8.25, incrementally, until it reached $15 in 2022.  Democratic Senator Kimberly Lightford, the bill’s sponsor, described the bill as the best chance to raise wages and improve living conditions for many Illinois residents.

Even though tax credits would be available to businesses with 50 employees or fewer to help cover the costs, Mark Grant, state director for the National Federation of Independent Business, in a written statement, warned that businesses would have limited options in dealing with the wage increase.

If the government dictates an increase in the cost of labor, employers have two options. They can raise prices, or they can try to get by with fewer workers.  If you can’t afford as many workers, you’re going to be very careful about the workers you do hire. You’re going to want employees you know can do the job. You can’t afford to take a risk on people with little or no experience.

Minimum wage policies promoted as boon for the poor, but are they?

Evidence exists that show minimum wage laws both fail to accomplish the results they were created for and even increase burdens on those they were intended to benefit.

Illinoisans have reason to be very concerned about the $15 minimum wage bill should Rauner sign the bill.  Recently a bombshell report was released about the impact of minimum wage hikes in Seattle, Washington. In a  study   conducted by economists at the University of Washington, it was determined that Seattle’s minimum wage laws significantly decreased employment for lower-income workers and also decreased their average work hours. The original proposal was for a $15 minimum wage, the national minimum wage benchmark for advocates.  An even more drastic result would have resulted had Seattle’s minimum wage law of 2015 been set at $15 instead of $13.

A separate study found that a significant number of middle-tier restaurant closures occurred after an increased minimum wage came into effect in San Francisco.

Impact of $15-per hour minimum tax on Illinois

Mandatory $15-per-hour starting wages was once considered a fringe idea, but union-backed campaigns have pushed the idea into the mainstream.  Might Chicago unions likewise have pushed for this bill as a way to inflate their already high union wages?

Heritage Foundation study indicates that in Illinois a $15-per-hour starting wage would eliminate more than 300,000 jobs. It is a misconception that creating jobs and reducing poverty is achieved by forcing employers to pay higher starting wages.

Another study reported by Melissa Bush for Illinois New Network on May 19, 2017, indicates that raising the state minimum wage to $15 an hour would not only lead to 93,000 fewer jobs across Illinois by 2027, but would also reduce the state’s production output by more than $56 billion over a 10-year period.

The report further shows that raising the minimum wage to $15 an hour from its current level is equivalent to raising the cost of labor for employers of minimum wage workers by 82 percent. Nearly 56 percent of the anticipated job losses would be in the small business sector of the economy.

Can Illinois afford to lose more jobs or impede businesses from expanding or creating jobs, when according to the U.S. Department of Labor Illinois has added only a net 100 jobs since the year 2000? That means Illinois employers have added 1 new job every two months.  Not only will the young find it more difficult to get first jobs, but technology will replace employees because of increased cost.

More criticism of Illinois’ proposed minimum wage hike

Mark Denzler, vice president and chief operating officer of Illinois Manufacturers’ Association, had this to say:

The proposed 82 percent hike in the state’s minimum wage will make Illinois’ [minimum] wage the highest in the nation and lead to further exodus of businesses.  For the last three years, Illinois has led the nation in out migration of people, largely because of the inability to find good jobs.

Since Illinois manufacturers pay an average of $75,000 per year with benefits, Denzler further urged legislators to look beyond the minimum wage and try to focus on helping Illinoisans get good-paying manufacturing jobs.

On May 31, 2017 Ben Gitis, Director of Labor Market Policy at the American Action Forum, released research that summarized job implications of a $15 minimum wage in Illinois.

Following are Gitis’ summary points:

  • Increasing the minimum wage to $15 per hour in Illinois could cost the state 382,200 jobs by 2025, virtually erasing all job growth over the next decade.
  • Illinois is in no position to absorb this shock, as its struggling labor market already lags the rest of the United States.
  • The proposed tax credit for businesses with fewer than 50 workers will likely do little to mitigate these negative consequences because most minimum wage employees work for businesses with more than 50 workers and the tax benefit itself is small and temporary.

The report concludes:

While raising the minimum wage is very popularit is important for policymakers to understand that it has a major cost. The proposal to raise the minimum wage to $15 per hour in Illinois would be particularly problematic, costing the state 382,200 jobs. With employment only growing 0.3 percent last year, the Illinois labor market is in no position to absorb this shock. Moreover, the tax credit proposed to help small businesses afford the minimum wage increase will not be able to save more than a handful of jobs. This is mainly because it is temporary and its design is flawed, illogically reducing assistance as the magnitude of the minimum wage increase grows. There simply is little reason to think that the tax credit would help businesses or their workers afford an 81.2 percent minimum wage increase.

Final thoughts

A report published by The Los Angeles Times on April 25, 2016, complied though exhaustive research done over the past few decades, suggested that raising the minimum wage had little negative impact on overall employment.  Perhaps this was the report read by Illinois legislators to conclude that raising Illinois’ minimum wage to $15 would help low-income workers?

Admitted, however, was that since past wage hikes had been relatively modest, no data existed to predict what would follow if the minimum wage were set at $15 per hour.  At the time of the report’s release, wage increases planned in CA and New York had not yet been fully implemented.

Following is one result experts predicted would happen, that did happen:  It may increase unemployment among minority youth:  If policymakers blame high crime in cities such as Chicago on steep poverty and unemployment, should they still advocate for a high minimum wage that might reduce jobs for the youth and exacerbate social problem.

Should Illinois be a part of what is a grand social experiment?  Few situations are more destructive to individuals and society than the lack of meaningful work for large swaths of the population.  Even a low-paying job is better than no job or opportunity at all.

Read here how Illinois became the most messed up state in this nation.