Between one-third and one-half of the rise in income inequality in America is due to the declining real value of the minimum wage.
The minimum wage is intended to ensure that working-class individuals can maintain a decent standard of living. Illinois’ Minimum Wage Law states that an employer who pays wages below “the minimum standard of living for the health, efficiency and general well-being of workers… places an unnecessary burden on the taxpayers of this State.” Despite this acknowledgement that poverty-level wages foster reliance on social safety net programs, a full-time worker earning today’s state minimum wage rate of $8.25 per hour brings home just $17,160 in annual income– below the federal poverty line for a family of three.
A new report, Raising the Minimum Wage: What $10, $13, or $15 Per Hour Would Mean for Illinois, by the Illinois Economic Policy Institute (ILEPI) and the Project for Middle Class Renewal at the University of Illinois Urbana-Champaign evaluates three potential minimum wage hike scenarios for the State of Illinois to help ensure that Illinois workers can sustain a “minimum standard of living.”
The last time that Illinois increased its minimum wage was in July 2010. If Illinois’ minimum wage had been indexed to inflation since then, it would be $10 per hour today. 13 states now have minimum wages of $10 per hour or higher, and 9 of these states have unemployment rates that are lower than or the same as Illinois.
Additionally, the majority of Illinois voters support increasing the minimum wage. In fact, 64 percent of Illinois voters support a minimum wage hike to $10 per hour. Republican gubernatorial candidate Bruce Rauner called for a $10 an hour minimum wage in the past, while Democratic gubernatorial candidate J.B. Pritzker advocates for a $15 an hour minimum wage.
Raising the minimum wage boosts worker earnings while having little effect on employment. New research on Chicago’s minimum wage hikes demonstrates this. Chicago’s minimum wage ordinance has already boosted incomes for 330,000 workers while having no impact on the unemployment rate. The State of Illinois should follow suit.
ILEPI evaluated three state minimum wage wage hike scenarios.
- Increase the minimum wage to $10 per hour on July 1, 2019: This would directly affect 353,000 low-income workers, most of whom are white, are women, and are native-born and naturalized U.S. citizens. Their average incomes would increase by more than $2,000 per year. A $10 minimum wage would reduce the number of Illinois residents in poverty by over 35,000, and generate $30 million annually in state income tax and sales tax revenues.
- Increase the minimum wage to $13 per hour over four years by July 1, 2022: This would put the statewide minimum wage just below the comparable level in the City of Chicago, which will have increased due to inflation. A $13 minimum wage would boost annual incomes by over $4,100 for 1.1 million low-income workers, reduce the number of Illinois residents in poverty by about 143,000, and generate $197 million annually in state income tax and sales tax revenues.
- Increase the minimum wage to $15 per hour over six years by July 1, 2024: This would directly affect 1.4 million low-income Illinois workers, about 23 percent of the total Illinois workforce. Directly affected workers– about half of whom are white, are women, are aged 30 years or older, and have children– would see their annual incomes increase by nearly $6,300 each. A $15 minimum wage would boost the economy by nearly $19 billion per year and lift nearly 212,000 low-income hourly workers out of poverty. The result would be $380 million in new state tax revenues, $348 million in additional property tax revenues for local governments, and $87 million in government savings every year as fewer workers qualify for and receive Supplemental Nutrition Assistance Program (SNAP) food stamp assistance.
The benefits of raising the minimum wage in Illinois simply outweigh the costs. The number of clear winners who remain employed and earn more per year far exceed the net change in working hours. In fact, a recent study found that these lost hours are spread among the affected workers, who work a little less but earn more per year. More income and more leisure time for workers boosts employee morale, improves overall life satisfaction, and contributes to higher net economic growth in Illinois.
The minimum wage is intended to ensure that working-class individuals can maintain a decent standard of living. Nevertheless, Illinois’ current minimum wage of $8.25 per hour fails to prevent workers from earning poverty-level wages. By raising the minimum wage, Illinois can boost worker incomes, reduce inequality, grow the economy, generate tax revenues, and decrease taxpayer costs for government assistance programs.
Raising Illinois’ minimum wage is a win-win-win.