Mixed opinions on minimum wage hike - Republic-Times | News

Mixed opinions on minimum wage hike

By on February 13, 2019 at 1:27 pm

A Waterloo Walmart employee moves carts from racks in the parking lot back to inside the store last year.

The Illinois Senate passed a bill Thursday that would increase the minimum wage in the state to $15 an hour by 2025. 

It passed along party lines, with 39 Democrats voting for and 18 Republicans voting against. 

The legislation, one of the principal policies Gov. JB Pritzker campaigned on, is now in the Illinois House of Representatives. 

“If you live in this state and put in a hard day’s work, you should be able to afford to put a roof over your head and food on the table,” Pritzker said. “This is a long time coming, and we’re not done yet, but we’re closer than ever before. Working families have not gotten a raise in Illinois since July of 2010 – nine years – and that raise was 25 cents.”

The bill would increase the minimum wage, currently $8.25 an hour, to $9.25 on Jan. 1, 2020. It would then rise to $10 that July, $11 on Jan. 1, 2021 and continue going up $1 each year until it hits $15 in 2025.

The legislation also provides some protection for small businesses, as it includes a tax credit for businesses with fewer than 50 “full-time equivalent” employees.

The tax credit would start at 25 percent of the cost of wage increases in 2020 and decline 4 percent per year until it was at 5 percent in 2025.

Businesses with between six and 50 employees could claim that 5 percent once again in 2026, while those with five or fewer employees could do so until 2027.

Those against the bill, including Republicans, argue that is not enough protection.

“Raising (the minimum wage) 80 percent over six years will have serious negative consequences for small businesses and their workers,” National Federation of Independent Business Illinois Director Mark Grant said. “Supporters of the hike say we need to raise the minimum wage because you can’t raise a family on $8.25 per hour, but we think that premise is a red herring. The minimum wage is actually a starting wage… It’s what an employer pays new, inexperienced workers who are learning job skills.”

State Sen. Paul Schimpf (R-Waterloo) spoke out against the bill following his “No” vote.

“This proposal will send job creators fleeing to neighboring states, place a tremendous budgetary strain on local institutions and make it much more difficult for unskilled workers to find jobs,” Schimpf said. “I urge my colleagues in the Illinois House to reject this rushed, one-size-fits-all proposal that will have negative consequences for our region.”

Missouri’s minimum wage is also increasing, as it is at $8.60 an hour now but will hit $13 by 2023.

Opponents of the bill also say it will cause employers to fire individuals or cut their hours to cope with the cost.

A 2017 University of Washington study that examined Seattle, which is raising its minimum wage from $9.47 to $15 over six years, found the new law actually decreased the number of low-wage jobs in the city by about 5,000.

It also found that net employee pay dropped 6 percent due to cuts in hours.

Additionally, the NFIB conducted a study after a similar bill was proposed in Illinois last year, concluding it would cost the state about 93,000 jobs over that bill’s first 10 years.

“What’s especially frustrating about all this is that economists say raising the minimum wage would have a negligible impact on working families,” Grant said.

Some opponents of the bill have advocated for a regional increase, with areas that have a higher cost of living increasing differently than those with a lower cost of living.

State Rep. Jerry Costello (D-Smithton) declined to say how he plans to vote on the bill, though he seemed to favor that position.

“My hope is that there will be a compromise in the House that reflects the regional economic diversity of our state,” Costello said.

Concerns have also been raised about how the new law would increase the state’s budget, as state employees would receive raises that would require entities like colleges to request more funding.

Pritzker’s office anticipated yearly increases to the budget that would start at $82 million next year and reach $1.1 billion annually by 2025.

His office reached that estimate because the bill accounts for an increase in appropriations for some programs and employee raises.

It does not account for increased demands for extra funding for nursing homes, hospitals, colleges, universities and other state agencies and human services providers.

Pritzker’s office further predicted that increases in income tax would offset some of those costs.

But overall, Schimpf said the bill would mainly hurt businesses.

“We’ve already seen too many jobs move across the border to Missouri, due to the poor business climate here and increasing costs handed down by state government,” he said. “We can’t afford to raise costs for our businesses any more unless we want to see more of them cross the river.”

Proponents of increasing the minimum wage say the tax credit and timetable will be enough to protect businesses.

“A six-year period will allow businesses time to plan and adapt to this legislation,” Pritzker said. “And small business tax credits will help ensure that suburban and downstate businesses and nonprofits are able to offset the offering of higher wages to their employees. I also want to be very clear that my administration will propose a balanced budget for the state – taking into account the effect of the new minimum wage.”

Additionally, other, larger studies have contradicted the 2017 University of Washington study.

A 2018 study from the Center on Wage and Employment Dynamics examined six cities that raised their minimum wage above $10 an hour. It focused only on the food services industry.

It found that employment barely fluctuated, ranging from a .3 percent decrease to a 1.1 percent increase, on average.

It also found employee earnings went up 1.3-2.5 percent.

A study conducted by the Illinois Economic Policy Institute and University of Illinois also discovered that the majority of studies focused on minimum wage hikes found the increase boosted employee earnings and had little to no effect on employment or hours.

Those researchers also said the proposed increase would directly affect about 1.4 million people in Illinois, most of whom are white, women and over 30.

Finally, the study found people who would get a raise from the new law in the St. Louis area, including Monroe County, would earn over $6,000 a year more.

The Associated Press calculated, however, that with inflation, the raise would only amount to a 27 percent wage increase for workers by 2025.

Like these studies, businesses in Monroe County have differing views on the legislation.

“As a small business owner, it’s a little scary,” said Lisa Jones, owner of Bean Tree Cafe in Waterloo. “Like every other small business owner my first thought is, ‘I can’t afford that!’ The reality is prices will go up… Small businesses simply can’t absorb an increase like that, and I think everyone gets that.

“No one is going to love paying more, but I really do think people will understand that the cost has to be passed along to the consumer. And, honestly, if helping the most vulnerable members of our society ends up costing all of us a little more, is that really such a bad thing?”

Schnuck Markets, which has stores in Waterloo and Columbia, did not yet know how the law would impact its operation.

“Schnucks is still evaluating the proposal as to how it will affect our teammates and customers,” company spokesman Paul Simon said.

Another local business, Bad Sister Boutique in Columbia, said the law would not affect them.

“Our pay is already very competitive because we believe that to have a good, strong workforce to uphold our values, we need to pay for it,” owner Heath Kapp said.

The bill is currently in the House. Pritzker has said he wants the bill passed ahead of his budget address on Feb. 20.

 

James Moss