The minimum wage battle – Possible minimum wage increase divides business community

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The minimum wage battle – Possible minimum wage increase divides business community

BY MONICA STABILE

The Illinois General Assembly’s approval last month of a measure to increase the minimum wage to $15 per hour over a five-year period has drawn mixed reviews among the business community.

Warning that a potential increase in the minimum wage could lead to Illinois becoming less competitive, some business groups say employers would be forced to make tough decisions to keep their businesses open.

Doug Knight, owner of Knight’s Action Park in Springfield, says he may be forced to raise admission prices and cut spending if faced with a requirement to pay a higher minimum wage.

“If the minimum wage is raised, how would I be able to maintain the same number of employees that I have now,” Knight asked. “Minimum wage will put people out of business.”

Knight’s family has owned the park since 1930. The business employs 200 workers, mainly high school and college students during the summer season. Once the school year begins and Knight’s employees return to school, the theme park season is over.

“A huge problem with the tourism industry is that we lose 10 percent of the season to kids going to school,” Knight said. “We used to have a 103-day season, now it’s a 90-day season.”

Sponsored by state Rep. Will Guzzardi, D-Chicago, and state Sen. Kimberly Lightford, D-Maywood, the legislation to raise the minimum wage for adult workers in Illinois was approved in both chambers of the Illinois General Assembly last month, but the bill has not been sent to Gov. Bruce Rauner for approval. In the past, Rauner has supported a minimum wage hike up to $10 per hour that would be tied to his “pro-business” agenda, but the governor says he intends to veto the legislation because $15 per hour would “crush jobs.”

If it were signed into law, the legislation would require employers to begin paying $10 per hour to employees age 18 and older starting January 2018. According to the legislation, employers would be required to raise the minimum wage each year until 2022, when workers 18 years and older would be paid no less than $15 per hour.

Employees younger than 18 years old also would receive a raise. A non-adult employee who has worked less than 650 hours within a year would receive a starting wage of $8 per hour in January 2018 and end with $12 in 2022. Working 650 hours within a year roughly translates to 12 hours per week for 52 weeks. However, an employee who works more than 650 hours in a year would receive the same compensation as an adult worker.

Under the minimum wage bill, businesses which employ between five and 50 workers would be eligible for a tax credit for each worker who qualifies for the higher minimum wage.
Outside of Chicago and Cook County, the minimum wage is currently $8.25 per hour, a dollar more than the federal level. About 40 percent of workers in Illinois earn less than $15 per hour, according to the National Employment Law Project.

A similar minimum wage experiment is already under way in Chicago, where a Cook County ordinance is set to increase the minimum wage on July 1 from $10.50 to $11 until it reaches $13 per hour in 2019. Employers also are required to offer paid sick days for full-time workers.

Theresa E. Mintle, president and CEO of the Chicagoland Chamber of Commerce, said a statewide minimum wage hike would place a burden on the business community and hinder job growth.
“We need to do the hard work of investing in our citizens’ workforce development, including vocational training, community college and the trades,” Mintle said.

Chicago Ald. Ameya Pawar, a Democratic gubernatorial candidate who worked to pass the minimum wage hike in Chicago in 2014, says more money for workers will help bring investment into neglected communities statewide.

“We live in a society, in a country, where you could work 40 or 50 hours a week, or two jobs full-time and not get ahead,” Pawar said. “Anything that infringes on the rights of people to collectively bargain for a better society, for better wages and benefits– that’s what I’m for.”

However, several Cook County suburbs have opted out of the minimum wage ordinance through city council votes, citing concerns over how the minimum wage increase affects the business climate.

“Retailers have limited responses: reduce hours, lay people off, increase automation or close,” said Rob Karr, president and CEO of the Illinois Retail Merchants Association.

The National Employment Law Project released a report in May which analyzed employment trends before and after federal wage hikes. Since the minimum wage was created under the Fair Labor Standards Act in 1938, there have been 22 federal minimum wage increases.

Researchers found no connection “between federal minimum-wage increases and lower employment levels, even in the industries that are most impacted by higher minimum wages.”

The National Low Income Housing Coalition, a housing advocacy group, reported that in Illinois, the fair market rent in 2016 for a two-bedroom apartment was $1,085. To afford this type of rent without spending more than 30 percent of total income on housing, a household must earn around $3,610 per month, or around $43,400 annually. To achieve that annual wage, the coalition says a worker must be paid an hourly wage of $20.87 for a 40-hour work week, 52 weeks per year.

In Sangamon County, to afford the fair market rent for a $783 two-bedroom apartment, a worker would have to make $15.06 per hour, or around $31,320 annually to avoid paying more than 30 percent of their income.

Business for a Fair Minimum Wage, a national group comprised of business owners who support gradually raising the minimum wage to at least $12 per hour by 2022, says that workers who earn more money drive the economy by spending more, leading businesses to see a rise in consumer demand, resulting in job creation.

A handful of Illinois business owners who support the minimum wage are calling on the governor to sign the legislation into law. Supporters argue raising the minimum wage would lower the employee turnover rate, increase productivity and increase customer satisfaction.

“Workers at one business are customers at another,” said Tim Frick, owner of Mightybytes digital marketing company in Chicago. “We can’t grow the economy by paying wages that workers can’t live on and then bemoaning weak consumer demand.”

Knight acknowledges that some business owners can afford to pay their employees a higher wage and that a wage hike could very well help the economy. However, he says higher wages could result in businesses raising prices, causing goods and services to become more expensive for customers.

Calling it a tough decision, Knight said that raising prices at Knight’s Action Park might be one of the first things implemented in order to afford paying a higher minimum wage to his employees. Customers unwilling to pay a $40 admission fee for the action park may travel elsewhere to a bigger attraction, resulting in lost profit, Knight said.

In addition to higher wages, Knight says workers’ compensation insurance costs would increase because premiums are based in part on wages. Higher wages would divert money that would otherwise be used for construction and maintenance repair, Knight says, resulting in less work for local unions to do repair work.
“I love my unions. I love my electricians, and I love my plumbers,” Knight said. “But if the minimum wage is raised and I don’t have enough money to pay the bills, I may have to forgo electrical or plumbing work.

“Who knows what a higher minimum wage would do,” Knight continued. “Whatever is going to happen is going to happen. I’m just trying to do the best I can.”

By |July 5th, 2017|Categories: Featured Article|0 Comments

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