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10/29/2014 | Raising the Minimum Wage

No Half Measures: Why It Will Take $15 to Raise Chicago

Although corporations are experiencing a profitable recovery, the jobs recovery has been grim and marked by a shift to lower wages.

    Summary

    Although corporations are experiencing a profitable recovery, the jobs recovery has been grim and marked by a shift to lower wages. A recent study by the National Employment Law Project found nationally that we have lost two million mid-wage and higher wage jobs since the Great Recession, but we have gained nearly two million low-wage jobs in the same time period. Businesses used the Great Recession as an opportunity to cut living-wage jobs (more of which were cut than low-wage jobs in the downturn) and replace them with low-wage jobs once they started hiring again. Jobs in lower-wage industries typically provide insufficient income for working families to meet their basic needs. Industry’s increasing reliance on low-wage jobs and failure to invest in its workforce threatens to exacerbate already extreme inequality and jeopardizes the city’s economic health. 

    In March 2014, 86 percent of Chicago voters supported a non-binding referendum to raise the minimum wage to $15 in Chicago. The City Council responded by introducing the Raise Chicago ordinance in May, which covers all employees working for businesses in Chicago with over four employees. Corporations (including their subsidiaries and franchises) with annual gross revenues over $50 million would be mandated to raise their wages first; small and medium-sized businesses would phase in the increases in subsequent years.

    In response to the increased activity for a $15 minimum wage, Mayor Rahm Emanuel convened a Minimum Wage Working Group in May to examine the question of low-wage work. The working group included representatives of some of the chief opponents to minimum wage raises, including the Chicagoland Chamber of Commerce, the Illinois Restaurant Association, and the Illinois Retail Merchants Association. In July, the group proposed raising the minimum wage for all workers at firms employing over four workers to only $13 by 2018, leaving out large groups of workers in the process. The Mayor’s Working Group appears to acknowledge the reasoning behind the growing nationwide momentum to increase the minimum wage to $15 in many of the nation’s most expensive cities, but responds by proposing a half measure here in Chicago. The proposal of the Mayor’s Working Group fails to secure the truly robust economic recovery that the $15 Raise Chicago ordinance would achieve.

    When fully implemented (at the end of its two phases), a $15 minimum wage would:

    • Increase wages: $2.49 billion in new gross wages.
    • Stimulate Chicago’s economy: $1.04 billion in new economic activity and 6,920 new jobs.
    • Increase city revenues: Over $80 million in new sales tax revenues.
    • Increase state revenues: $125 million in new income tax revenues.

    In contrast, a $13 minimum wage would result in:

    • Only 50% as great an increase in new gross wages—of $1.25 billion.
    • $522 million dollars in new economic activity (a raise to $15 would almost double that).
    • Only $40 million in new sales tax revenues, half that of the $15 proposal.