Raising the minimum wage is one of left-leaning millennials’ favorite talking points. It seems raising the minimum wage is the bad idea that just won’t go away. Illinois could be the twentieth state to raise their minimum wage in recent years, though it is already $1 higher than neighboring states.
The House and Senate passed legislation late May that would gradually raise the minimum wage from $8.25 to $15 by 2022. Senate Bill 81 still requires Gov. Bruce Rauner’s signature in order to become law, who has yet to commit on the measure. The governor earlier told the Chicago Tribune the bill would be “crushing to small businesses, and crushing for job creation.”
House bill sponsor, Ill. State Rep. Will Guzzardi (D-Chicago) said that a higher minimum wage is necessary for low-income workers to make ends meet, and that the plan includes an income tax credit for businesses that have fewer than 50 employees covering up to 25 percent of income liabilities in 2018, which shrinks to a maximum of 5 percent in 2022. The bill also allows lower pay for those younger than 18 who work less than 650 hours per year.
So does raising the minimum wage truly help low-income workers? Only the ones who keep their jobs.
Ben Gitis, Director of Labor Policy at the American Action Forum, published research that SB 81 would result in 328,200 jobs lost by 2025, and that the tax credit would not be effective because it is temporary and few businesses with less than 50 employees pay minimum wage.
Michael Tanner, Senior Fellow at the Cato Institute, explained the fallacy behind the minimum wage in an interview with Red Alert Politics.
“If people think raising the minimum wage to $15 is a good idea, why not raise it to $50?” Tanner asked. “Because businesses would shut down. Businesses pay according to worker productivity, or valued added. When employers are forced to pay a minimum wage, they must do away with low-skilled jobs.”
Tanner said that when labor becomes more expensive, businesses respond through using automation, hiring fewer workers, and increasing menu prices to offset higher costs. While larger businesses may survive, small business with smaller margins will be hit the hardest, many who will be forced to shut down or move out of state. A higher minimum wage lowers job opportunities for those desperate for employment.
In summary, when you fight for $15, you may be replaced with a kiosk.
John Hopkins University applied economics professor and Senior Cato Fellow Steve Hanke studied 2012 European Union minimum wage effects and published The Truth Behind Minimum Wage Laws, comparing employment levels of seven E.U. countries having no minimum wage to the 21 countries that do. The average country unemployment level with wage floors was 11.8 percent; without floors was 7.9 percent. Moreover, youth unemployment (younger than 25) in countries with minimum wage was 27.7 percent; without them was 19.5 percent.
Raising the minimum wage raises unemployment, and younger generations are the first to lose their jobs.
As Milton Friedman stated, “The real tragedy of minimum wage laws is that they are supported by well-meaning groups who want to reduce poverty. But the people who are hurt most by high minimums are the most poverty stricken.”
