Illinois governor proposes higher minimum wage, AKA higher unemployment for his state
On Wednesday, Illinois Governor Pat Quinn proposed raising the state’s minimum wage to $10 an hour. According to the governor, this will be good for the state’s unemployed:
During his annual State of the State address to lawmakers, the Chicago Democrat asked them to raise the minimum wage from $8.25 to $10 an hour. Although the state already has one of the highest rates in the nation, Quinn argued another boost would help increase the quality of life for residents.
“Nobody in Illinois should work 40 hours a week and live in poverty,” Quinn said during his speech. “That’s a principle as old as the Bible.”
Supporters are backing the proposal wholeheartedly:
Illinois last saw a minimum wage increase in 2010 when it jumped to $8.25 through a four-step step increase adopted under imprisoned former Gov. Rod Blagojevich in 2006. The Democrat raised the minimum wage twice during his time in office, making it a center piece of his agenda. The federal rate has been $7.25 an hour since 2007.
Washington and Oregon are the only states with a higher rate than Illinois, according to statistics from the U.S. Department of Labor.
“I didn’t see any businesses leave the state,” said Lightford, a Maywood Democrat. “Our goal is not to put people out of business.”
According to Michael Sneed of the Chicago Sun-Times, the current minimum wage in Illinois brings in about $17,000 in full-time wages, over $1,000 below the federal poverty rate for a family of three. Sneed’s numbers, however, do not represent the full story. Consider what the Bureau of Labor Statistics reported about the minimum wage in 2011:
- 59.1% of all hourly and salary workers were paid in hourly wages.
- Only 5.2% of hourly workers made the minimum wage or less, and 1.7 million earned exactly the minimum wage – a small fraction of the workforce.
- Most importantly: “Among employed teenagers paid by the hour, about 23 percent earned the minimum wage or less, compared with about 3 percent of workers age 25 and over.” Also, one half of minimum wage (or less) earners are under 25, meaning, the minimum wage isn’t generally being made by people with children. Also, part-time workers (many of whom are young) were paid at or below the minimum wage at a rate over six times that of full-time workers.
What might happen if Illinois raises its minimum wage? According to two large business lobbyist organizations in Illinois, higher unemployment for low-skilled workers. Forbes columnist William Dunkelberg, discussing the concept of the minimum wage in 2012, agrees:
Firms cannot pay a worker more than the value the worker brings to the firm. Raising the minimum denies more low skilled workers the opportunity to get a job and receive “on the job” training. The impact of raising the minimum wage in 2009 on teen employment makes it very clear that this is especially harmful for young teen workers looking for their first opportunity to have a job. Raising the cost of labor raises the incentive for employers to find ways to use less labor. Most minimum wage earners are not in poverty, yet their employment opportunities are impaired as well as those who are. This is but one of the poorly designed policies that are created by politicians who have little or no understanding of how business works. They promise higher legislated wages or other benefits to constituents who don’t understand the true economic impact in order to gain votes.
Unfortunately, Illinois is not the only state considering this economically unsound policy. New Jersey is also trying to head there:
New Jersey Democrats are moving forward with their plan to ask voters to approve an increase to New Jersey’s minimum wage.
The state Senate approved a resolution Thursday asking voters to sign off on a constitutional amendment raising the minimum hourly wage from $7.25 to $8.50 and making future increases automatic based on the federal consumer price index.
And Washington Post columnist Matt Miller is pushing for it in his newest column:
The federal minimum wage has been stuck at $7.25 since 2009. In 1968, the minimum wage was worth $10.47 in today’s dollars. According to the Organization for Economic Co-operation and Development, the United States is near the bottom of advanced nations when it comes to the ratio of the minimum wage to the median wage. In Australia, the minimum wage now tops $15, and unemployment is 5.4 percent.
Clearly, policymakers in New Jersey and Illinois, and Miller as well, do not understand the basic economics described by Dunkelberg. Like any other regulations or mandates, costs will simply shift to consumers, or lower-skill workers will find themselves out of a job. Miller even acknowledges this, admittedly in a backhanded fashion:
Whether we pick $12, $15 or some other number, the question is how best to share the cost of achieving this decent minimum among employers, taxpayers (via subsidies for low-wage work) and consumers (via slightly higher prices).
Yes, we’ll need exemptions to the new minimum for young trainees, restaurant workers and some others.
–This line of thinking fails to recognize that employers are also consumers, and employers are also taxpayers, meaning some people could be hit three ways under Miller’s proposal. Additionally, his proposals for exemptions for those likely to be hit the hardest – restaurant workers and young trainees – show he recognizes the flaws fiscal conservatives have long claimed are part of an increase in the minimum wage.
In light of the clear economic data against raising the minimum wage, Tea Party Patriots has two simple questions for Governor Quinn: If $10 per hour is a decent minimum wage, why not make it $20 an hour, or $40 per hour? Why limit the increase at all?