Chicago: Since Chicago increased its minimum wage on July 1, the policy has produced higher incomes for at least 330,000 low-wage workers, while having no negative impact on the growth of new businesses or overall employment in the city, according to a new study released last week.
Conducted by the Illinois Economic Policy Institute (ILEPI) and Project for Middle Class Renewal (PMCR) at the University of Illinois at Urbana-Champaign, the research analyzed income, business growth, and employment data from 2010 to 2016 both for the City of Chicago– which increased its minimum wage from $8.25 to $10.50– and a control group of Chicago suburbs in Illinois, Indiana, and Wisconsin where the hourly minimum wage still stands at either $8.25 or $7.25 per hour.
“Chicago’s minimum wage increase is largely working as intended, and has directly benefited more than a quarter of the city’s workforce,” said study co-author and ILEPI Policy Director Frank Manzo IV. “The data shows that Chicago is producing higher incomes, less income inequality, and modest business and employment growth that is commensurate with neighboring communities that made no change to their local minimum wage policies.”
In December 2014, the Chicago City Council voted overwhelmingly to gradually lift its minimum wage from the state minimum of $8.25 per hour to $13.00 per hour by July 2019, after which it will be indexed to inflation. In doing so, the Council carved out an exemption for teen workers, who can still be paid $0.50 below the state minimum wage (or $7.75 per hour).
By comparing economic outcomes between the City of Chicago and suburbs that made no change in their minimum wage policy, the study was able to assess impacts on both hours worked and business and employment growth— common concerns raised by opponents of minimum wage increases. Notably, during the period covered by the study, job growth in the Chicago metro area surpassed the rest of Illinois, Indiana, or Wisconsin.
“As minimum wages in Chicago have increased, private sector business growth has kept pace— and in some cases even exceeded— that of suburbs where the minimum wage didn’t change,” added study co-author and University of Illinois Research Associate, Dr. Robert Habans. “In fact, the unemployment rate actually dropped more in Chicago than the surrounding suburbs. This suggests that, even if the minimum wage had a small negative impact on employment, it was more than offset by favorable conditions for job creation, including the ripple effect as higher wages for low-income workers stimulate consumer spending.”
The report highlights the fact that the City of Chicago’s minimum wage increase now provides low-income workers as much as 25% more purchasing power than comparable workers in the suburbs and other portions of the state.
