On $15 minimum wage hike, Rauner should listen to constituents

Photo by Yingxu Jane Hao

Fast food workers, Fight for $15, Black Lives Matter activists and others march outside a downtown McDonald’s demanding that the Illinois General Assembly pass a $15 minimum wage increase on April 4, 2017.

“Listen to the people.” That was Gov. Bruce Rauner’s mantra last week when he was urging the General Assembly to uphold his budget veto.

But will Rauner listen to the people – who have made clear their support for a higher minimum wage – or will he veto the minimum wage bill now on his desk?

A referendum to raise the state’s minimum wage was endorsed by 64 percent of voters in 2014, far more than the 50.3 percent who voted for Rauner that year.  That means at least a half million Rauner voters – at least 25 percent of his own supporters – backed a wage hike.

Suburban officials have set a bad example.  In community after community, both rich towns that could afford an increase and poor towns in which constituents desperately need one, officials have been falling over themselves to opt out of a Cook County ordinance that would raise the minimum wage in steps to $13 by 2020. (The state bill would raise Illinois’ minimum wage to $15 an hour over the next five years.)

They’re going against the will of their constituents, expressed in the 2014 referendum, in which voters in every municipality in Cook County backed a wage hike – many by margins of 60, 70, and 80 percent.

They may also be violating the Illinois Constitution, which doesn’t allow cities to override county decisions, according to County Commissioner Larry Suffredin, who’s reportedly considering a lawsuit to defend the county ordinance.

Most suburban officials are representing their own interests as business owners rather than the interests of their constituents, said Ron Baiman, an economist at Benedictine University in Lisle, who recently posted a paper on the suburban opt-out drive on the website of the Chicago Political Economy Group.

In recent weeks, many city and town councils have called “emergency sessions” to consider opting out of the county ordinance.  In Oak Park, where Baiman lives, a council meeting was called for the Friday before the Fourth of July on one day’s notice – clearly an attempt to evade public scrutiny, Baiman said.  Nonetheless, scores of minimum wage supporters turned out, and the opt-out effort wilted after they informed the mayor they would picket his restaurant to inform potential patrons that he had “voted for poverty,” Baiman said.

Though opt-out efforts were defeated only in Berwyn, Evanston, Oak Park and Skokie, dozens of communities saw people turn out to express opposition, said Shelly Ruzicka of Arise Chicago, the faith-based worker support center.  Arise organized to support the county’s new paid sick leave mandate, which was also subject to opt-out efforts.

“People on the ground who heard about it mobilized very quickly, and they were very angry,” said Ruzicka.  They included local chapters of Indivisible, the national network that has sprung up to oppose Trump administration policies.  “People are really charged up,” said Ruzicka. “They are looking to the next election.  This is not going away.”

In his paper, Baiman also looks at the ideological arguments for opposing a minimum wage hike – principally a new University of Washington study that found significant reductions in employment and hours resulting from Seattle’s $13-an-hour minimum wage.  It’s a favorite of minimum wage opponents; in a Sun-Times op-ed, former McDonald’s CEO Ed Rensi called the study a “blockbuster” that proves “the $15 minimum wage has been a disaster.”

It’s a strange study.  Its results are far more dramatic than any of the many studies by economists of the minimum wage in recent decades.  Part of the problem is that it excludes all multiple-site employers who have workers both in and outside Seattle (researchers couldn’t figure out how to disaggregate those employers’ data).  That means that 40 percent of the city’s workforce isn’t counted, including major low-wage employers like McDonald’s.

Then there’s the study’s finding that while employment paying less than $15 an hour declined significantly, jobs paying over $19 an hour expanded just as dramatically.  Baiman doubts that finding is sound, but points out that minimum wage opponents citing one result shouldn’t ignore the other.

Plenty of studies have found little or no job loss from minimum wage increases, Baiman said– probably because higher costs to business are offset by higher demand, since low-wage workers spend most heavily in the local economy.

In addition, employers get “a more productive workforce and a more committed workforce,” and save on costs of recruitment and training caused by higher turnover, he said.  Low-wage restaurant and service employers tend to be location-specific, and aren’t going to reduce their workforce if they want to keep their customers, he added.

One analysis found that paying McDonald’s workers $15 an hour would increase the cost of a Big Mac by 22 cents.  People aren’t going to drive to another state to save less than a quarter on a hamburger.

But the real question is what kind of economy we want, according to Baiman. An economy that consistently increases poverty and inequality is “a failed economy,” he writes.

The federal minimum wage grew (in 2016 dollars) from $5 an hour in 1950 to $9.63 in 1973 – years when it closely tracked productivity increases, and when the nation experienced relatively sustained prosperity and began to address historic racial injustices.  Since then, however, productivity has continued to climb but the minimum wage has fallen in constant dollars.

The basic fight is over how productivity gains will be divided between labor and capital, Baiman writes — and whether labor will get a fair share.

Our state’s minimum wage workers haven’t had a raise since 2010, and if the opt-out people have their way, they may never get one.  If it had kept up with inflation, the minimum wage would be close to $10 an hour today, which is where the county ordinance sets it as of July 1. Where should it be in 2020, or in 2023?  Is our state’s economy designed to reduce poverty or to grow it?

Some 2.3 million Illinois workers – 40 percent of the state’s workforce – earn less than $15 an hour, according to Neal Waltmire of SEIU Healthcare, which is backing the statewide minimum wage hike.  That includes 48 percent of African-American workers and 61 percent of Latinos. They struggle to pay rent. Many depend on public assistance to make ends, including an estimated 50 percent of the state’s fast food workers.

Local officials may want to consider those numbers.  Gov. Rauner may want to consider the number of his own voters who support a fairer economy.

  • Leah

    Has anyone looked at other states who caved to pressure to increase minimum wage. Automation came quicker, less hours or fewer people. All comes down to fewer jobs.Those receiving help from the government asked for less hours because the increase gave them more money but not enough to offset the help they were getting in SNAP ect Maybe I am old but minimum wage jobs use to be entry level jobs and then move on to better jobs. Illinois has enough problems. People are leaving and now businesses too due to new tax on business. Our property taxes are going up, up, up. How about common sense reforms and training for better jobs that warrant $15 an hour.