Study: Raising Minimum Wage Hurts Low Wage Workers

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As Governor Bruce Rauner (R-IL) considers a bill which would gradually raise Illinois’ minimum wage to $15/hour, a new study has found that raising the minimum wage hurts rather that helps low wage workers because of its impact on employment.

The study by the University of Washington looked at the effect of Seattle’s decision to raise its minimum wage to $11/hour and then $13/hour while surrounding areas did not.  It found that only about 25% of low wage workers benefited from the increase while most were hurt by it because of a significant decrease in both hours worked and low wage jobs overall.

The report, which used data from the State of Washington to make its analysis, does come with a caveat.  Researchers note that Seattle has a booming economy which could impact the labor force in various ways.  They did conclude though that low wage workers were lagging behind even in Seattle even in an economic boom with an increased minimum wage.

“The reduction in hours would cost the average employee $179 per month, while the wage increase would recoup only $54 of this loss, leaving a net loss of $125 per month (6.6%), which is sizable for a low-wage worker,” researchers concluded.

The study, said to be the most comprehensive yet of the impact of a minimum wage hike, poses a dilemma for Governor Rauner.  The legislature has passed SB81, co-sponsored by Rep. Litesa Wallace (D-Rockford), which would gradually raise the minimum wage to $15/hour statewide by 2022.

Supporters of the bill say, “More than 40 percent of Illinois workers across all industries, across all age ranges and across all points of Illinois, will benefit from a wage increase,” according to a news release from labor union SEIU Healthcare.

Rauner and others have argued that Illinois is losing jobs to neighboring states, and has seen sub-par economic growth when compared other Midwestern states and the nation as a whole in part because of higher taxes, excessive regulation and lack of wage and worker cost competitiveness.

The University of Washington study indicates that signing SB81 could potentially lead to an even bigger decrease in low wage jobs, with some leaving Illinois to states with lower labor costs.  Other low wage jobs would possibly be eliminated altogether, ending up hurting most those workers SB81 was passed to help.

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