Businesses coping with Illinois’ minimum wage increase

[January 16, 2023]  By Zeta Cross | The Center Square contributor

(The Center Square) – Illinois’ minimum wage increased to $13 at the beginning of the year and businesses are feeling it.

In 2019, after no increases in the minimum wage since 2010, the legislature agreed to a gradual increase that will top off at $15 an hour in 2025.

The passage fulfilled a campaign pledge from Gov. J.B. Pritzker. In step with the ramp-up, the Illinois minimum wage will increase to $14 an hour on Jan. 1, 2024, and on Jan. 1, 2025, the minimum wage will reach $15.

Todd Maisch, president and CEO of the Illinois Chamber of Commerce, said the increase is “particularly painful” for retailers, restaurants and employers in the service industry.

“Employers are trying to decide whether they will trim hours or trim jobs. In some instances, if they think they can get away with it, they will have to raise prices,” Maisch told The Center Square.

Maisch said that for businesses that are struggling with inflation, paying a higher minimum wage is more pain for the bottom line.

“Governments cannot create demand; they cannot create revenue," he said. "So that means that small businesses must decide how to cut costs. Way too few members of the legislature understand that basic fact."

Lawmakers act as if all businesses have a secret vault of cash that they can tap to pay higher wages, Maisch said.

“We all know that that is not the case,” he said.

Keeping wages artificially high makes it harder for inflation to go down, Maisch said, and raising prices is not an option for many businesses.

A store in Danville, Illinois, closing after 120 years in business. (Daniel Schwen | Wikimedia via Creative Commons)

“Coming off of very aggressive inflation, that is the last thing that small businesses want to do,” he said. “Over time, inflation impacts consumer behavior more and more. Consumers are spending less and less at restaurants and other places."

Maisch thinks most employers will opt to trim jobs and cut hiring rather than raise prices.

The service industry, including retail, is on the frontline when it comes to the minimum wage hike, Maisch said. He expects businesses to opt for more automation in response.

“Whether it will be self-serve sodas or having customers tap screens to put in their own food orders, more businesses will decide that they have to go that route," Maisch said.

Raising the minimum wage will have a ripple effect, he said.

“For a manufacturer, the fact that somebody can come in and on the first day on the shop floor make $13 an hour, that means that everybody that’s been there for six months or a year or two is going to pressure the employer for higher wages,” Maisch said.

High-performing employees will get the wage increase, Maisch said, but employers will become even more hesitant to bring on new employees that they would have to train.

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