Questions and Answers about… Raising the Minimum Wage in Illinois

Q: What is the minimum wage?

A: The current minimum wage in Illinois is $8.25 an hour – about $16,500 a year. The minimum wage is the only policy that sets a floor on wages in the United States and has a significant impact on the pay scales of low-wage workers. The minimum wage reached its peak value in 1968. Inadequate federal and state action has caused it to erode in value over time.  Had it kept pace with inflation, the minimum wage would be over $10 today.

Q: Who will benefit from an increase in the minimum wage in Illinois?

A: The increase will primarily benefit low-income families who depend on the earnings from minimum wage workers to make ends meet.  Of the workers who will get this proposed raise, over 80% are age 20 or older, over half work full-time and another third work between 20 hours and full-time. 

Q: Should we raise the minimum wage in a struggling economy?

A: Minimum wage increases stimulate the economy through increased consumer spending.

Consumer spending drives 70 percent of the economy, and increasing demand is the key to jumpstarting production and rehiring. A raise in the minimum wage helps low-income households who immediately put the money back into the economy at the local grocery store, barber shop or gas station. The Economic Policy Institute estimated that the 2009 federal minimum wage increase from $6.55 to $7.25 an hour would generate $5.5 billion in new consumer spending. A robust minimum wage can help build a sustainable economic recovery-- without increasing costs to taxpayers.  Despite opponents’ claims, extensive research on state minimum wage increases shows no evidence that such increases result in job loss, even in times of economic recession.

Q: What have other states done?

A: Illinois, is one of 17 states (and the Distict of Columbia) that have state minimum wages above the federal level. Two of Illinois’ regional neighbors, Michigan and Ohio, also have state minimum wages above the federal minimum.  While Congress has failed to adequately raise the federal minimum wage, states have historically taken action and continue to do so. Currently, efforts to raise the minimum wage are underway in Maryland, California, Delaware, Massachusetts and Maine.  Ten states also “index” their minimum wage so that it is adjusted annually to keep up with inflation.

Q: What if we don’t raise the minimum wage?

A: The minimum wage – already badly eroded - will continue to lose value, dragging down pay for workers in the growing low wage industries that increasingly characterize our economy. Minimum wage earners in Illinois’ already have $2/hour less in purchasing power than a minimum wage earner in the late 1960s, and their ability to cover basic expenses will continue to decline. Wage inequality – driven in part by the declining value of the minimum wage compared to other workers’ wages – will worsen.  In addition, businesses that pay a living wage will face unfair competition from minimum wage employers taking advantage of the artificially low wage rate.

Q: Won’t employers flee to surrounding states with lower minimum wages?

A:  No, most minimum wage employers are service sector businesses who are tied to our state because that is where their customers are: restaurants, including fast food; retail stores, such as Wal Mart and Target; healthcare services, such as nursing homes; temporary and day labor services.  A study of Illinois’ 26% increase in the minimum wage in 2004 and 2005 showed that the impact of the Illinois state minimum wage increase on employment or hours in fast food outlets in Illinois as compared with Indiana (which had a lower minimum wage) was not statistically different from zero.  Our proposal is to raise the minimum wage by 29% over four years, a much slower rate of increase. 

Q: Won’t corporations who pay minimum wage layoff employees or go out of business if the minimum goes up?

A: No, most corporations are making very healthy profits again.  In fact, they are cash-rich right now, because they are making money but are not hiring new workers.  Employers say they will not increase hiring until demand for their services increases.  In order to increase consumer demand, regular working families have to have more income.   An increase in the minimum wage will put more than a billion dollars of demand back into our state economy.

Q:  Low wage workers just got hit with a big income tax increase, without any increase in personal exemptions or Earned Income Tax Credit to protect their small incomes.  Doesn’t that amount to a pay cut for the lowest income Illinois citizens?

A: Yes, while we support the income tax increase and the courage of the Democratic legislators who passed it, the Illinois tax system is very unfair to the lowest income workers.  Minimum wage workers will see a significant reduction in their paychecks, which an increase in the minimum wage could serve to offset.