Illinois Governor J.B Pritzker signed on Feb. 19th a $15 minimum wage bill to go into effect by 2025.
Proponents of higher minimum wages believe it acts like a tide; it raises all low-paid workers to give them more opportunity. But past minimum wage hikes show it benefits some workers while drowning the rest.
McDonalds, the second largest employer in the world, demonstrates this when they quit lobbying against a higher minimum wage, which SEIU President Mary Kay Henry celebrated this in a statement. “By sticking together and taking action on the job, courageous workers in the Fight for $15 and a union have forced McDonald’s – the second-biggest employer in the world – to drop its relentless opposition to higher pay.”
Mrs. Henry should have analyzed McDonald’s strategy — slashing its labor force by more than 50 percent from 2013-18 while building new restaurants across the world, states Jon Miltimore of FEE.
McDonalds gave up fighting minimum wage hikes and focused on its locus of control: automation. The business announced most of their 14,000 location will install self-serve kiosks, that they don’t have to worry about calling in sick or giving poor customer service. Now if your order is wrong, it’s on you.
Raising the minimum wage only helps the workers who keep their jobs. Low-skilled workers are the first to go, explains Michael Tanner, Senior Fellow at the Cato Institute.
“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 value added. When employers are forced to pay a minimum wage, they must do away with low-skilled jobs.”
A higher minimum wage decimates job opportunities for those most desperate.
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. Those with little experience, especially teenagers and new graduates, will be fired while more experienced workers keep 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.”
As learned by past wage hikes, businesses handle a higher minimum wage in several ways. They raise prices, cut benefits, fire low-skilled workers, cut hours, and replace workers with automation. Businesses leave in the long-term.
A $15 minimum wage will crush Central and Southern Illinois — the majority of Illinois — which is mainly farmland. I grew up in Carbondale, home of Southern Illinois University, a sleepy college town full of small businesses. 45% of residents are below the poverty line, with 5% unemployed. Most entry-level and even higher jobs start at $10 or below. Unless you work in healthcare, for the college, or for the state (which arguably shouldn’t count as productive employment), your job most like doesn’t have any healthcare benefits. Southern Illinois is known for one thing: prisons because even if inmates escape, they have nowhere to run.
One significant employer in the area is Gilster-Mary Lee, factories that create generic cereal. By definition, this employer can’t raise prices. They already give little to no benefits, and their profit margins can’t survive paying all of their employees such a high wage until they can automate further. So they, like so many other businesses, will move across state lines. Wisconsin, Iowa, and Indiana have $7.25 minimum wages, while Missouri’s is $8.60.
The Southern Illinoisan, a local newspaper, already moved its printing to Missouri because they couldn’t weather higher costs.
More than 114,000 left Illinois in 2018, and that number will most likely rise in the coming years. Illinois has a $3.2 billion budget deficit and a $15 billion debt from unpaid bills. Instead of cutting spending, they’re still trying to tax their way out of it — from taxing Playstations to lap dances.
Southern Illinois is a beautiful part of Illinois, but I don’t believe it will survive this wage hike by 2025. I dread the day I come back to see only a shell of a town known for its nature adventures instead of its college, restaurants, and 75 cent rail mixed drinks.