What Illinois lawmakers need to know about a minimum-wage increase
The Illinois General Assembly is currently considering a dramatic increase in the state’s minimum wage.
The Illinois General Assembly is currently considering a dramatic increase in the state’s minimum wage. While this issue is politically popular, the impact of such an increase is likely to inflict financial harm on those who can least afford it.
Illinois lawmakers should not pick economic winners at the risk of creating economic losers. But that’s exactly what a minimum-wage hike will do.
Here are three primary arguments that should give lawmakers pause as they consider hiking the state’s minimum wage:
No. 1: Shuts lowest-skilled workers out of the job market
The logic of a minimum-wage increase is that paying the lowest-wage workers more per hour will increase their incomes. But, for many, it will actually destroy their current job or shut them out of entering the workforce completely.
A recent report from the Congressional Budget Office estimates that 500,000-1,000,000 workers could be thrown into the ranks of the unemployed as a direct result of increasing the federal minimum wage to $10.10 an hour. By ignoring the labor-market prospects for low-skilled workers, those pushing for a minimum-wage hike are trading the higher incomes of some for the unemployment of others.
No. 2: Ignores safety net already in place, making many financially worse off
Supporters of a minimum-wage hike who claim they want to help working families are either ignoring the current safety net or need to do their homework. For single-and two-parent households, there is a significant welfare “cliff” where the household may become financially worse off as they work more hours or as their wages increase. That is because the available welfare benefits, including tax credits for earned income and child care, decline by a greater amount than the increase in earned income.
For example, the current proposal could cause a family with two low-wage workers to lose thousands in household resources. The minimum-wage increase would be more than canceled out by reduced government benefits.
No. 3: It’s a crude antipoverty tool
At present, there are almost 100,000 Illinoisans who are paid less than the federal minimum wage (which is lower than the state’s mandated minimum wage). Many of these individuals work on commissions or tip income. That is why statistics pointing to large numbers of people who might be “helped” by such a proposal are misleading. Even with the proposed minimum-wage increase, this law will not significantly impact these numbers.
Furthermore, wages are fluid. Of those workers making the minimum wage today, two-thirds will be earning a higher wage one year from now. Most workers, once they learn the job and demonstrate a level of competence, will earn more as the value of their labor increases to their current employer or a competing one. A snapshot of how many people earn the minimum wage today is not an accurate indication of who would benefit given that many will have already moved up the income ladder next year.
There is no doubt that the 4.2 million Illinoisans who work year-round need relief. But the best ways to achieve that goal are reducing the barriers to job creation and opportunity, as well as allowing workers to keep more of their hard-earned dollars.
Mandating that employers pay more not only dampens future job growth, it also throws the lowest-skilled workers into the ranks of the unemployed or shuts them out of the labor market altogether.
A minimum-wage hike will cause the most harm to the workers who have the most limited job prospects. Any movement on this proposal without first acknowledging and publicly debating this impact is unfair to Illinoisans.