Higher minimum wage would boost state economy
A hike in the Illinois minimum wage would affect up to one in four workers and potentially add $19 billion to the state economy, according to a new study
By Ted Cox
A new study of proposals to raise the state’s minimum wage finds that all would improve the conditions of workers and the state economy.
The Illinois Economic Policy Institute released the study “Raising the Minimum Wage: What $10, $13, or $15 per Hour Would Mean for Illinois” on Thursday along with the Project for Middle Class Renewal at the University of Illinois at Urbana-Champaign. Their research found that the proposals would affect up to a quarter of state workers and “would grow the economy by $5 billion to $19 billion per year.”
The study points out that Illinois set its $8.25-an-hour minimum wage in 2010, and that if it had kept pace with inflation it would now be almost $10 an hour. According to the study, 13 states have minimum wages of $10 an hour, and of those nine have unemployment rates equal to or lower than Illinois.
The study cites proposals to hike the minimum wage to $10, $13, or $15 an hour, and for comparison’s sake sets them on a calendar that would establish a $10 minimum wage next year, $13 in 2022, and $15 in 2024. Just the hike to $10 would affect 6 percent of Illinois workers and raise their annual salaries by $2,000. The ultimate hike to $15 would affect 23.3 percent of state workers and raise their salaries more than $6,000.
“Increasing the minimum wage is a win-win-win for workers, taxpayers, and the economy,” said ILEPI Policy Director Frank Manzo IV. “It means higher wages and less poverty for workers, more spending across the economy, higher tax revenues, and less reliance on welfare programs.”
Because low-income workers would most likely spend the increased wages on necessities and not pour them into savings account, “the increased consumer spending associated with wage increases would grow the economy by $5 billion to $19 billion per year,” according to the study.
It points out that a full-time Illinois worker making minimum wage earns $17,160, “$3,620 below the federal poverty line for a family of three and $7,940 below the federal poverty line for a family of four.” Thus, “by increasing incomes, a minimum wage hike could lift as many as 212,000 workers out of poverty,” accompanied by government savings in assistance programs like food stamps.
“Increasing the minimum wage is good policy for taxpayers because it means more revenues to invest in vital public services like education, infrastructure, and public safety while reducing reliance on the social safety net,” added UIUC Professor Robert Bruno, a co-author. “The question isn’t whether we should increase the minimum wage — it’s why haven’t we done it already.”
The study projects that a higher minimum wage would result in more income-tax and sales-tax revenue for the state, as well as increased property-tax revenue locally, while offering savings on federal assistance programs.
It dismisses concerns that a higher wage would mean fewer people employed, citing another recent ILEPI study that found Chicago benefited from a hike in its minimum wage without dragging on local businesses.
“Raising the minimum wage boosts worker incomes while having little to no effect on employment,” the study states. “Chicago’s minimum-wage ordinance has already boosted incomes for 330,000 workers while having no discernible impact on the unemployment rate. Illinois should follow suit.”
“A minimum wage that keeps up with the cost of living can make a significant difference in the lives of working families,” added study co-author Jill Manzo. “If Illinois’s minimum wage was indexed to inflation, it would already be $10 per hour and tens of thousands of families would be lifted out of poverty.”
The study concludes: “By raising the minimum wage, Illinois can boost worker incomes, reduce income inequality, increase consumer demand, grow the economy, generate tax revenues, and decrease taxpayer costs for government assistance programs.”