ILEPI Testimony on $15 Minimum Wage

On Wednesday, February 6, the Illinois House Labor & Commerce Committee held a hearing on gradually raising the minimum wage to $15 in Illinois. Frank Manzo IV, MPP, Policy Director of the Illinois Economic Policy Institute (ILEPI) provided a brief testimony. Here is what he said.

Please CLICK HERE to read a full version of the testimony.

Click here for a one-page fact sheet on the $15 minimum wage

Good afternoon, Mr. Chairman and Members of the Committee. My name is Frank Manzo IV. I am the Policy Director of the Illinois Economic Policy Institute, a nonprofit research organization that provides candid and dynamic analyses on major subjects affecting the Illinois economy.

The minimum wage has been at the forefront of state action on labor policy. In January, 19 states raised their minimum wages. Four states have enacted legislation to gradually raise the minimum wage to a uniform $15 an hour across the entire state. Missouri voters approved a minimum wage hike in November 2018.

Low-wage workers in Illinois, on the other hand, are falling behind. Illinois has not increased its minimum wage since July 2010. And a full-time worker earning today’s state minimum wage brings home about $17,000 a year. This is about $9,000 below the federal poverty line for a family of four. To put it simply, Illinois’ current minimum wage fails to prevent workers from earning poverty-level incomes.

Economic research finds that minimum wage hikes boost worker earnings. Fully 90 percent of academic studies find that a higher minimum wage is associated with higher incomes. In addition, economists at the Federal Reserve Bank of Chicago have found that minimum wage hikes actually have a spillover effect, raising the incomes of those who earn slightly above the new minimum wage level.

At the same time, recent research finds little to no impact of minimum wage laws on employment. Dozens upon dozens of studies have been conducted in this area, and the research consistently shows a small or negligible impact on jobs and hours. A 2018 report, for example, studied one million hourly employees in over 300 firms and found that existing minimum wage employees were no less likely to be employed after a minimum wage hike.

There are many reasons for this. The research shows that a higher minimum wage reduces worker turnover and stimulates the economy through increased consumer demand. By boosting incomes and lifting workers out of poverty, minimum wage hikes increase sales at local retailers, restaurants, and small businesses– offsetting any drops in labor demand. The impact on prices is also modest. In the Pacific states, a 10 percent minimum wage hike has been associated with a 1 percent rise in restaurant food prices but no statistical impact on supermarket prices.

In the past 12 months, I have co-authored three studies on the effects of raising the minimum wage with Professor Robert Bruno from the University of Illinois at Urbana-Champaign. In June of 2018, we analyzed the early effects of the Chicago Minimum Wage Ordinance and found that it is working largely as intended. Investigating data from 2010 through 2016, we concluded that the ordinance has already boosted annual incomes for at least 330,000 workers, with the greatest income gains for those in low-wage occupations such as janitors and hotel cleaning maids. Meanwhile, the city did not fare worse on employment outcomes. In fact, the unemployment rate fell further in Chicago than it did in neighboring suburbs where the minimum wage was not increased.

The entire State of Illinois could follow suit. In an October 2018 report, we found that increasing the state’s minimum wage would grow the economy and boost the paychecks of more than 1.4 million adult workers– the majority of whom are U.S. citizens, women, and worker 30 years old or older. A $15 minimum wage would lift over 200,000 people out of poverty in Illinois.

And, in a report released this week, we find that a uniform $15 minimum wage would have the largest impacts in communities outside of the Chicago area. It would raise directly-affected worker earnings by about $5,000 in the Chicago area, $8,000 in the Springfield area, $7,000 in the Rockford area, and $6,000 in the St. Louis area. As a result, more working-class families would be able to cover their housing expenses. In fact, the share of renters who are housing cost burdened would decrease by 20 percent in the Chicago area but by more– between 25 percent and 28 percent– in the Springfield, Rockford, and St. Louis areas.

The minimum wage is intended to ensure that working-class individuals can sustain families and cover living expenses. A uniform $15 minimum wage in Illinois would allow families to maintain a decent standard of living in every corner of the state.

I thank you for allowing me the opportunity to submit my testimony.

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