Two wrongs don’t make ‘fight for $15’ debate right
The “Fight for $15” per hour is back in Illinois, although it’s not likely to be much of a fight, and this time, there’s a bit of a twist.
Democratic Gov.-elect J.B. Pritzker is telling anyone who will listen that he wants to gradually raise the state’s minimum wage to $15 per hour starting in the first six months of his term that begins in January.
Republican Gov. Bruce Rauner vetoed the last legislative attempt to gradually raise the state’s minimum wage, but with Pritzker winning in November and a supermajority of Democrats now in the Senate and the House, efforts to resist it likely are futile.
That’s despite the fact Pritzker essentially is conceding that “Fight for $15” is bad policy by acknowledging it will hurt small businesses — and therefore jobs. So, to offset that negative impact, he’s also proposing some sort of nonspecific tax breaks for small businesses.
As of yet, his proposal doesn’t define what a small business is. Is it fewer than 20 employees? Fewer than 50? One hundred or more?
With few details to go on, here is Pritzker’s plan in a nutshell:
He wants the government to artificially set a much higher wage floor by almost doubling the state’s existing minimum wage of $8.25 per hour.
Knowing this will lead to job losses, he also proposes that state government pick winners and losers in the marketplace by giving some — not all — businesses tax breaks to hopefully offset those job losses.
Regardless of the details, two wrongs don’t make a right or, in this case, two bad policies don’t result in one good one.
There already is strong evidence that dramatically raising the minimum wage results in significant job losses and hour reductions on those workers that “Fight for $15” supporters are trying to help the most — younger workers and those with low skill sets.
A study from the Mercatus Center at George Mason University found that minimum wage hikes resulted in fewer teens participating in the workforce. The study also found the average teen worker pay increased at a slower rate in states and municipalities with higher minimum wages.
A separate study by the University of Washington found that a minimum wage increase in Seattle resulted in an average loss of $129 per month for workers because of reduced hours and job cuts.
Jacob L. Vigdor, a professor at the Evans School of Public Policy and Governance in Seattle, said that combining a large minimum wage hike with a tax break for smaller businesses also can have unintended consequences.
“It does introduce this disincentive to increase your employee count above a certain threshold,” Vigdor said. “You could imagine with a provision like that there would be lots of conversations between business owners and tax lawyers and accountants to try to figure out how do I grow this business while taking advantage of the small business provisions.”
At $8.25 per hour, Illinois’ minimum wage is a dollar more than the federal minimum wage. It also is higher than all neighboring states except Michigan.
Separately, Chicago is on target to increase its minimum wage to $13 per hour by July 2019, and Cook County by July 2020. Downstate businesses will feel the negative impact of minimum wage hikes significantly more than Chicago businesses will.
The best option here is for government to just stay out of the way and let the markets determine rates. In big government Illinois, that’s just not going to happen.