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 The city of Chicago is raising the minimum wage July 1, requiring larger
businesses to compensate non-tipped employees at least $15 an hour and
increasing base wages for tipped employees in both the city of Chicago and Cook
County.
The hike in labor costs will hit Illinois’ small businesses hard, as they
struggle to meet both rebounding demand and their hiring needs. That is
especially bad for Illinois, where small businesses account for 69% of overall
job growth in the state. Data shows that in the past year, more than half of the
state’s food and accommodation businesses vanished.
Unfortunately, that means fewer jobs available for the more than 363,000
Chicagoans still looking for work.
The wage hike is part of an ordinance passed by Chicago Mayor Lori Lightfoot in
2019. The law reduces the rate to $14 an hour for businesses with 20 or fewer
employees, but even they will be forced to meet the $15 minimum by 2023.
The ordinance will raise rates for tipped Chicagoans to $9 an hour under the
condition that workers still earn the static minimum wage after receiving tips,
or the burden will fall upon employers to pay the difference.
After July 1, Lightfoot’s law ties future increases in Chicago’s minimum wage to
the consumer price index. As the price index increases yearly as a reflection of
inflation, this guarantees that the city’s minimum wage will continue to
increase over time.
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Larger businesses can often absorb these higher
labor costs. Unfortunately, these increases have an outsize impact
on small businesses, leading to fewer new hires in the fastest
growing businesses.
Research suggests higher minimum wage levels lead
to creation of fewer jobs. This is particularly true for the
low-skill jobs which are often the first to decline in response to a
rise in the minimum wage.
A 2018 University of Wisconsin, Madison study on the effects of
Minnesota’s 2014 progressive minimum wage hike offers a relevant
example. The study found that youth employment dropped by 9% and
service industry employment overall fell 4% in the years immediately
following minimum wage increases.
Moreover, empirical evidence suggests minimum wages do not elevate
low-income families, nor reduce most forms of public assistance, but
rather benefit individuals who are already employed.
In an area still facing significant unemployment and ravaged by the
loss of businesses over the past year, this type of feel-good law,
which flies in the face of established research, is surely a better
political ploy than it is aid to struggling residents. |
