You are on page 1of 2

Minimum Wage

Hurting More than Helping

Problem
Illinois’s minimum wage, already high at $8.00 highest.4 As shown in the chart below, Illinois
an hour, is set to increase by another 25 cents has sustained a higher minimum wage than the
on July 1, 2010. This ill-timed hike in the mini- federal level since Blagojevich’s 2003 increase.
mum wage will hurt low-skilled workers and
the small business owners who want to employ According to American Enterprise Institute
them. With each of Illinois’s neighboring states adjunct scholar Richard Burkhauser, over
having a lower minimum wage, hiring new the last two decades a majority of studies by
workers in Illinois makes less business sense for economists conclude increases in the minimum
June 30, 2010

entrepreneurs watching the bottom line. wage directly correlate with considerable
increases in unemployment and cause no
Why did Illinois approve a minimum wage in- decrease in poverty among the working poor.6
crease in the middle of a great recession? For-
mer Governor Rob Blagojevich made his first The National Center for Policy Analysis argues
minimum wage increase in 2003, raising the minimum wage increases hurt younger work-
rate from $5.15 to $6.50 per hour. This change ers, especially minority teenagers, who need
made the rate in Illinois higher than the federal entry-level jobs and have limited employment
government’s rate, which at the time equaled opportunities.7 Imposing a minimum wage—
$5.15.1 On December 18, 2006, Blagojevich especially one higher than the federal govern-
signed Senate Bill 1268 and increased the state ment’s—puts a strain on employers by increas-
Policy Brief

minimum wage to $7.50 per hour, effective on ing operating costs. If the government requires
July 1, 2007, and required an annual increase of a small business to pay more than the market
25 cents for the next three years.2 value of labor, the employer will often respond
by simply not hiring for the job. High rates can
Only California, Connecticut, Massachusetts, force employers to cut back on entry-level jobs.
Vermont, Oregon and Washington have higher This results in higher unemployment, and ends
minimum wage rates than Illinois.3 All six states up hurting—rather than helping—people look-
pay $8.00 or more in minimum wages, with ing for job opportunities, especially at the lower
Washington’s $8.55 an hour rate being the end of the skill ladder.8

Graphic 1: Illinois Hourly Minimum Wage Rates5


Through 7/01/07- 7/01/08- 7/01/09- On /after
Year
6/30/07 6/30/08 6/30/09 6/30/10 7/01/10
Illinois
$6.50 $7.50 $7.75 $8.00 $8.25
Rate
Federal
$5.15 $5.85 $6.55 $7.25 $7.25
Rate
Source: Illinois Department of Labor

Kate Piercy is director of government reform for the Illinois Policy Institute.
Page 2 of 2

This has a ripple effect for teenagers, who need 4 U.S. Department of Labor, “Minimum Wage
entry-level job experience to get higher-level Laws in the States,” January 1, 2010, http://www.
jobs later on. The longer teens are out of work dol.gov/whd/minwage/america.htm#Washington.
while they are young, the harder it will be for
them to get jobs when they are older. Down 5 Illinois Department of Labor, “Illinois Minimum
the road, it becomes more likely they will have Wage Rates By Year,” http://www.state.il.us/agency/
lower-income jobs because of lost entry-level idol/Facts/mw.htm.
job experience.9 In the end, high minimum
wage rates bring about additional, unnecessary 6 Richard Burkhauser, “Cutting the Basic Wage
barriers to success for young or low-skill to Spur Jobs,” Articles and Commentary, American
workers—and yet, in the midst of a recession, Enterprise Institute, March 9, 2010, http://www.bls.
Illinois is set to increase its minimum wage. gov/web/laus/laumstrk.htm.

Our Solution 7 Bruce Bartlett, “The Minimum Wage Is Bad


Illinois should not increase its minimum wage Policy,” National Center for Policy Analysis, February
rate to $8.25 on July 1, 2010. A preferable op- 4, 2005, http://www.ncpa.org/pub/ba499.
tion would include at least keeping it at the cur-
rent rate. Even better, the state should reduce it 8 Arthur B. Laffer, Stephen Moore, & Jonathan
to the minimum rate set by the federal govern- Williams, “Rich States, Poor States,” American
ment. Legislative Exchange Council, March 2009, www.alec.
org.
Why This Works
9 Richard Burkhauser, “Cutting the Basic Wage
Illinois’s Illinois’s minimum wage rate puts a financial
to Spur Jobs,” Articles and Commentary, American
strain on businesses and ends up hurting many
minimum workers more than helping them.
Enterprise Institute, March 9, 2010, http://www.bls.
gov/web/laus/laumstrk.htm.
wage rate
Entrepreneurs and businesses form the
puts a backbone of an economy. When labor is
artificially priced above its market value by
financial government, jobs that would have been filled
strain on go uncreated. Without the ability to build
and grow, the economy suffers, and most
businesses importantly, people suffer.
and ends up Endnotes
hurting many 1 United States Department of Labor, “What is
minimum wage?” http://www.dol.gov/elaws/faq/esa/
workers more flsa/001.htm.
than helping 2 Illinois Government News Network,
them. Press Release, “Governor Blagojevich Signs
Groundbreaking Legislation to Increase Minimum
Wage in Illinois,” December 18, 2006, http://
www.illinois.gov/PressReleases/ShowPressRelease.
cfm?SubjectID=3&RecNum=5605.

3 Will Buss, “Some bemoan hike in wages; state


minimum goes up to $8 an hour July 1,” Belleville
News Democrat, June 15, 2009, http://www.bnd.
com/2009/06/15/808179/some-bemoan-hike-in-
wages-state.html.