Chicago Increases Minimum Wage, Once Again

E+ / Susan Chiang

It is relatively common to find liberal politicians advocating for an increase in the minimum wage. Currently, the United States has a federal minimum wage of $7.25. When speaking about this, the workforce, and families in poverty, President Obama said “nothing helps families make ends meet like higher wages…And to everyone in this Congress who still refuses to raise the minimum wage, I say this:  If you truly believe you could work full-time and support a family on less than $15,000 a year, go try it.  If not, vote to give millions of the hardest-working people in America a raise” According to the U.S. Census Poverty Thresholds of 2015, an individual is considered living in poverty if they make less than $12,331 annually. With a minimum wage of $7.25, making an annual salary of $12,000 is no difficult task, but this threshold can appear insignificant. The annual salary of $12,331 is only considered the baseline for poverty of a one-person household. If that person is the sole provider for a child, then their poverty threshold is increased to $16,337. With the annual salary for those making $7.25 an hour being $15,000, this 32% increase is enough to keep anyone making the national minimum wage under the poverty line. The Obama Administration’s push for an increase in the federal minimum wage has fallen on deaf ears. However, many state and local governments have taken it upon themselves to increase the hourly wages of the poorest members of their workforce.

One city, in particular, plans to increase their minimum wage to $13.00 an hour by 2019. On December 2nd, 2014 the mayor of Chicago, Rahm Emmanuel, along with the City Council put in action the plan that would lead to gradual increases over the following 5 years. Friday, July 1st marked the second step in that process; increasing the minimum wage from $10.00 an hour to $10.50. Approving this ordinance was not a unanimous decision; many feel this gradual increase is not gradual enough. Tom Tunney, a member of Chicago’s Workplace Development & Audit Committee, told the Chicago Sun-Times his opinion on the matter; “how do you go from $8.25 [an hour] to $13 overnight? You know what you do? You raise the prices and you’ve also got to find ways to do it with less help. That’s what’s going to happen”. Using broad statistics to debate the minimum wage increase decision of the Chicago City Council is asinine. The only way to determine if this decision was an acceptable one is to apply the pros and cons of increasing the hourly wage, to Chicago’s unique employment structure.

The following list of pros and cons come from ProCon.org (a nationally recognized resource for providing full views of controversial issues) and are followed by Chicago-based applications.

Cons:

“Increasing the minimum wage would force businesses to lay off employees and raise unemployment levels”.

It is hard to dispute that increasing the minimum wage will lead to some job loss. If a company is used to spending a certain amount of money to pay their workers and are then forced to increase the allotted funds, the easiest solution for that company would be to decrease the amount of people working for them. Prior to the 50 cent increase Chicago had on Friday, the city faced an even greater augmentation of hourly wages a year prior. The first step to increasing the minimum wage to $13.00 by 2019 was to take the original wage of $8.25 and to increase it to $10.00. That 21% increase took place on July 1, 2015, and was followed by the lowest unemployment rates of that year. For the next 5 months, Chicago found its rate dropping an entire percentage point. Not until January of this year, did the city face a rise in the unemployment rate; a rise, that is quickly on the decline. In most cases, a jump in minimum wage would lead to a surplus of unutilized workers, however, that has not been the case in Chicago.

“Raising the minimum wage would disadvantage low-skilled workers.”

The logic behind this con is that if an employer has to pay their workers more money, the standard of which they hire is going to increase. To depict this as a real life application, consider this; the GM of a local convenience store has just been told to pay her workers one dollar more than their original wage. The GM complies, but when the time comes to hire more employees, she is now looking for more qualified candidates to work for her. Prior to this wage increase, she would have settled for anyone that could do the job. This scenario is not far-fetched, uneducated Chicago citizens in the workforce will suffer immensely from this. With high school graduation rates not even breaking 70%, many people, specifically African Americans and Hispanics, will be forced to fight over the limited jobs available to them.

Pros:

“A minimum wage increase would help to reduce race inequality”

In Chicago, people of color make significantly less than their white counterparts, on average. What many will be surprised to learn, however, is that people of color don’t make up nearly as much of the minimum wage workforce as one would think. In fact, whites make up nearly 50% of the minimum wage working population for Chicago, while black and Hispanic workers make up only 18% and 27%, respectively. Increasing the minimum wage will not reduce racial inequality, nearly as much as many have argued. Improving schools in poorer neighborhoods and encouraging young people of color to attend college will lead to the significant reduction in racial inequality that many claim a higher minimum wage would do.

“Raising the minimum wage would reduce crime”

Crimes such as burglary, robbery, grand theft auto, drug dealing, and at times, murder can all be traced back to the desire to have more. In some instances, the desire to take care of one’s family can lead to good people doing horrific things. Crime’s affiliation with poverty, in Chicago, is a clear indicator of that. The city’s south side is more likely to host violent crimes than its north side counterpart. It should be no surprise that the wealth gap between the two areas is so great. Neighborhoods such as Little Village average an income of around $25,000 while Lincoln Park, a neighborhood only 7 miles away has an average income 3 times as high. By increasing the minimum wage, those living in these poorer neighborhoods are less likely to commit crimes, because that need to care for their families can be met through their job.

There is a plethora of reasons for and against increasing the minimum wage, but examining the previous four shows just how complicated debating this topic can become. Regardless of anyone’s opinion, Chicago’s minimum wage will continue to increase over the next three years. The economic theorists that claim that this was either a smart or uneducated decision will soon have the facts to back up or disprove their claims. At this point, it is a waiting game.