Just a little over a month after becoming Illinois’ governor, J.B. Pritzker signed a law that stands to change the state’s economy by raising the minimum wage from $8.25 to $15 by 2025.
Whether becoming the first state in the Midwest to have that high of a minimum wage will help or hurt the economy depends on perspective.
Advocates, including the unions that backed Pritkzer’s path to the governor’s mansion and members of the “Fight for $15” coalition, say the long overdue hike will revitalize the economy as low-wage workers spend their paychecks, kick-starting a chain reaction of growth.
“They will be consumers. They will be out. They will boost the local economy and they will pay taxes,” said Michael Carrigan, president of the Illinois AFL-CIO.
But business owners say the very employees the law intended to help may instead be out of work, as they’ll have little choice but to lay off staff, reduce hours or even turn to automation, especially downstate.
The latest monthly unemployment rate data released by the Illinois Department of Employment Security shows that the non-seasonally adjusted unemployment rate in the Chicago region in December was 3.6 percent. But in Kankakee and on the Illinois side of the Quad Cities, the unemployment rate is 5.9 percent; in Decatur, in central Illinois, it’s 6.2 percent. Illinois’ highest rate of unemployment is 6.3 percent in the Rockford region.
The Illinois Retail Merchants Association and other umbrella business groups had fought for zones in which the state would set a higher wage level for Chicago and the collar counties and a regionally adjusted lower wage elsewhere.
In response to a reporter’s question, Pritzker – a billionaire heir to the Hyatt fortune – said he is a businessman who understands those concerns and who is “attuned” to the need to create jobs in Illinois.
“I understand very acutely the importance of growing the economy,” Pritkzer said. Keys to job creation include allowing small businesses to more easily access capital so they can grow, he added. He also signaled his intention for a downstate revitalization plan.
Per city ordinance, the minimum wage is already $12 in Chicago and is set to increase to $13 this summer, compared with the statewide $8.25 minimum wage.
The new law will see the statewide minimum wage rise to $9.25 in January 2020. By July 2020, the it will rise to $10 and thereafter, the minimum wage will ramp up by a dollar annually until it reaches $15 in 2025.
There is no mechanism to tie the minimum wage to inflation afterward.
The law Pritzker signed Tuesday during a ceremony at the governor’s mansion in Springfield passed without a single Republican vote. A sign, critics say, that Pritzker is already breaking his promise of working in a bipartisan fashion.
“This is only the beginning of J.B. Pritzker’s war on taxpayers and small business. Nearly doubling the minimum wage will destroy entry-level jobs, raise prices for consumers, and bust budgets at every level of government,” Illinois Republican Party Chairman Tim Schneider said in a statement. “Pritzker pledged to govern differently and listen to all parties and stakeholders, but those turned out to (be) meaningless words.”
While individual restaurant owners signaled frustration, the Illinois Restaurant Association endorsed the measure, and president Sam Toia pushed back on the narrative that Pritkzer didn’t compromise. (One such compromise is key to the food service industry: The law will continue to allow restaurants to count gratuities toward tipped workers’ wages).
Toia called the law a “reasonable, balanced approach” that took the restaurant industry’s concerns into account.
“This was compromise. I rebut anyone that says this isn’t a compromise. They weren’t at the table. You need to be at the table, you’re on the menu,” Toia said, adding that it gives “entry-level employees the boost they deserve.”
The measure also allows small businesses with 50 or fewer employees to temporarily claim an annual tax credit to offset the cost of their rising payrolls.
Business groups say it’s little more than political cover: The credit, which is initially good for 25 percent of the minimum wage cost, scales down and then expires completely.
The governor says the minimum wage bill is just the beginning of his work to bring “real and lasting change” to Illinois’ working families. He’ll lay out next steps Wednesday when he gives his highly anticipated budget address.
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