Report shows increasing Illinois minimum wage might actually speed up job creation

Jul 17, 2014

State lawmakers are looking to increase the Illinois minimum wage from the current rate of $8.25. They’ve placed an advisory question on the November ballot, and a panel in Chicago has recommended the city increase its minimum wage to $13 per hour by 2018.

Increasing the Illinois minimum wage has its critics, particularly those who believe it is just a political ploy to get Democrats out to the polls in November to vote.

But a recent study shows there might be an advantage to increasing the minimum wage, at least in the area of job creation.

Writes Ben Wolcott from the Center for Economic and Policy Research (CEPR):

At the beginning of 2014, 13 states increased their minimum wage. Of these 13 states, four passed legislation raising their minimum wage (Connecticut, New Jersey, New York, and Rhode Island). In the other nine, their minimum wage automatically increased in line with inflation at the beginning of the year (Arizona, Colorado, Florida, Missouri, Montana, Ohio, Oregon, Vermont, and Washington state).

As CEPR noted in March and April posts, economists at Goldman Sachs conducted a simple evaluation of the impact of these state minimum-wage increases. GS compared the employment change between December and January in the 13 states where the minimum wage increased with the changes in the remainder of the states. The GS analysis found that the states where the minimum wage went up had faster employment growth than the states where the minimum wage remained at its 2013 level.

When we updated the GS analysis using additional employment data from the BLS, we saw the same pattern: employment growth was higher in states where the minimum wage went up. While this kind of simple exercise can’t establish causality, it does provide evidence against theoretical negative employment effects of minimum-wage increases.

In this post, we can now bring these figures up to date with the data from April and May.

The image below from the CEPR shows all 50 states, plus the District of Columbia, and the change in their employment figures from the last five months of 2013 to the first five months of 2014.

minimum wage chart

Notice Illinois has the fifth-worst rate of all the states.

According to the CEPR, 12 of the 13 states that increased their minimum wage in early 2014 saw positive job growth with New Jersey being the exception. Those 13 states averaged an employment change of +0.99 percent while the other 37 states and the District of Columbia averaged an employment change of +0.68 percent.

So while the report was written specifically for the minimum wage hike in Washington, D.C. that occurred on July 1, the data could be useful for Illinois and Chicago.

At least it provides an argument for those who support a hike.

NEXT ARTICLE: Mapping it out: An interactive map of U.S. unemployment

Also recommended:

  1. What’s holding back Illinois’ economic recovery? 
  2. Only in Illinois: Voting for a budget or voting for a tax increase?
  3.  Stop increased spending and permanent tax increase
  4. Civic Federation: Don’t let tax increase expire; start taxing retirees
  5. Want to tell your elected officials what you think of the state of governing in Illinois? Use our Sound Off tool. 


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