An article in which I was quoted. Posted: Saturday, August 30, 2014 12:33 am Dennis Yohnka dyohnka@daily-journal 815-937-3384 | 0 comments Would it send the economy back into recession, or would it lift some hardworking people out of poverty? The debate over the impact of suggested hikes to the federal or state minimum wage has simmered, probably, since the first minimum wage was federally legislated in 1938. But it might come to a boil, with a non-binding referendum set to be added to the Nov. 4 ballot. In todays economy, we feel like the states [minimum wage] $8.25 is $2 behind where it should be, explained Josh Collins, a proponent of Mayor Rahm Emanuels $13-an-hour, four-year phase-in trial balloon, and the legislative director for Citizens Action Illinois, based in Chicago. I feel like this discussion is going to be revisited over and over until the minimum wage is linked to the cost of living index. It would appear that many Chicagoans agree with Collins. According to a recent poll, 84 percent of the participants supported Emanuels proposal. However, the mayor confirms that there is no plan for a city council action at this point. Meanwhile, Olivet Nazarene University economist Paul Koch, a business professor here since 1992, isnt so sure that anyone knows the full repercussions of a hike. It would have a different impact on employers and employees across the board, he said. It might reduce employment levels. It would provide a small increase to some, but others might experience a delay in getting hired. In some cases, employers will have to determine if the new new wage is higher than an employees productivity. In other cases, workers with advanced degrees would find their wages barely above those of the untrained worker at minimum wage. Holding more demanding, responsibility-laden jobs, these workers would expect their employers to maintain the same wage advantage that the staff now holds over the minimum-wage earners. Back on the political level, Bruce Rauner, the Republican candidate for governor, announced in January that he would be in favor of lowering Illinois minimum wage, by one dollar, evening the playing field in the Midwest, where Indiana, Iowa, Kentucky and Wisconsin all follow the federal guideline at $7.25. Michigan checks in at $7.40, while Connecticut is at $8.70, Oregon at $9.10 and Washington state at $9.23. These are the only places where the minimum wage is set higher than Illinois $8.50. Rauner has since backed off of his position on lowering the wage, but he suggests that he definitely isnt interested in raising it. Democrat governor Pat Quinn, meanwhile, seems ready to make the push for a $10 wage part of his re-election campaign. I think the position of employers is that an increase in the minimum wage would increase costs and that leads to three potential outcomes, ONUs Koch said. They could raise prices, knowing that customers might look for an alternate vendor. Secondly, they could reduce the owners or the shareholders return, and thats not an easy decision. Or, they could economize and cutback in other ways, but most businesses have already trimmed back, he said. Responding to the notion that an increased minimum wage would lead more businesses to pull out of Illinois, Koch suggested that while labor costs are important — location and infrastructure are also considerable factors that might limit a widespread exodus. But there seems to be more stakeholders here than the businesses that employ minimum-wage workers and the families that survive on those wages. A college graduate, working in his field in Bourbonnais, noted that minimum wage hikes might allow an entry-level position to grow into a $30,000-per-year job. And thats great pay, without a college degree, he said. Whats the incentive for continuing your education? Larry Marks, a consultant to the banking industry and the former CEO at Republic Bank of Chicago, said he has heard all of the arguments and reached a simple conclusion. There is only one crucial issue in play: Will low-income wage earners be able to successfully support themselves and their families? Thats it. Everything else is noise, he told The Daily Journal. For example, the impact on small businesses, an often-expressed concern, is really an illusion, he said. The number of employees in small businesses is, by definition, few in number and a jump in wages, even to $13 an hour, will likely have no great impact on their cash flow. It will have even less impact on their profits, since all wages paid are tax deductible. There is now enough experience in other states to demonstrate that workers receiving a higher wage, whether voluntary or mandated by the state, are better workers. They tend to be healthier, enjoy better nutrition and have healthier children, which reduces days off for caring for sick kids. Meanwhile, a Forbes magazine column by William Dunkelburg takes the opposite viewpoint. The chief economist for the National Federation of Independent Business and a professor emeritus at Temple University concludes that any proposed hike in the minimum wage is one of the poorly designed policies that are created by politicians who have little or no understanding of how business works. They promise higher legislated wages or other benefits to constituents who dont understand the true economic impact in order to gain votes. Others counter that the government would see savings from reduced need for food stamps and other wage supports if workers took home a larger paycheck. Apparently, the fate of Illinois minimum wage comes down the Quinn-Rauner race. The Chicago proposal will rely on Emanuels re-election prospects. Stay tuned.
Posted on: Wed, 10 Sep 2014 19:51:02 +0000
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