Minimum wage in Illinois increasing; critics fear job loss

CHICAGO -- Illinoisans earning the minimum wage will see a pay raise over the next 16 months, but critics fear those jobs could be jeopardized if businesses hire fewer workers or move to other states to avoid paying higher salaries.

Gov. Rod Blagojevich, a Democrat whose fall election campaign included a promise to hike the minimum wage, dismissed criticism of the bill he signed into law Thursday as "hollow."

"I think, frankly, it's just the other way around. Working people will have a little extra money to spend every week and every month, they'll spend it on things that they need and businesses will be the beneficiaries of it," he said.

Organized labor, which endorsed Blagojevich and worked hard to get him elected, lobbied strongly for the measure that raises Illinois' minimum wage from the federally required $5.15 an hour to $6.50 an hour.

"We have so many low wage workers that are finding it difficult to pay their bills, keep their families together and this will help a little bit," said Margaret Blackshere, president of the Illinois AFL-CIO.

The federal minimum wage of $5.15 an hour has been in place since 1997. States can set their own higher minimum wages, and 11 have done so while several others will increase their rate.

Illinois' minimum wage would increase 35 cents an hour Jan. 1 and jump another $1 in 2005. Employers could pay 50 cents less to workers under 18.

Someone working 40 hours a week, 52 weeks a year would make $13,520 at the higher wage of $6.50, compared with $10,712 at the current minimum.

The U.S. Department of Labor estimates that 97,000 Illinoisans last year made the minimum wage or, because of exceptions, even less.

But a recent study by the University of Illinois at Chicago's Center for Urban Economic Development estimated about 450,000 people in Illinois who earn $6.50 an hour or less will benefit from the bill.

J. Fred Giertz, professor of economics at the Institute of Government and Public Affairs at the University of Illinois, said the Chicago area will be less affected by the higher rate because many workers there earn more than the new minimum.

"But downstate, where the prevailing wages for low skilled people are below the new minimum wage, it could have a bigger impact, especially because we have to worry about competition with the surrounding states," he said.

Raising the minimum wage also can hurt the very people who earn that rate if companies hire fewer workers or have layoffs, he said.

"The people who aren't going to be hired are the people who are the most vulnerable, with the lowest skill," he said.

He said a mass exodus of businesses closing or moving out of state is not likely, but there will be some negative impact because the national economic recovery is "anemic" and the state's economy is bad.

Sid Shanks, who owns four pizza stores in central and southern Illinois, said he probably won't layoff workers but he may cut their hours. Most of the minimum wage workers he employs are high school students.

"We'll probably have to get by with less staff, which means we don't give as good a service and that will affect sales," he said.

Shanks, who is also coping with an increase in the price of cheese, also might hike the price of pizza.

"My greatest concern is, when I increase the price of pizza, I lose another group of customers who can't afford to buy it anymore," he said.

Maria Sanchez, a 32-year-old single mother of three, earns $5.25 an hour at her 25-hour a week job at Dunkin' Donuts in Chicago. She said the increase will help, but it isn't enough.

"The money that I make is not enough to pay the rent, the gas bills, the electricity bills," she said through an interpreter because she speaks Spanish.

Lawmakers who opposed the bill say the higher wage could drive jobs or businesses to neighboring states that maintain the $5.15 an hour rate.

"The gas tax is cheaper in Indiana, the sales tax is cheaper in Indiana, the cigarette tax is cheaper in Indiana and now the minimum wage is cheaper in Indiana," said Rep. Chapin Rose, R-Mahomet, whose district includes Metcalf, Ill., near the Indiana border.

"What incentive is there for anyone to put a retail outlet up in Metcalf when everything is cheaper 20 miles to the east?" Rose said.

Edward Deak, an economics professor at Fairfield University in Connecticut, said minimum wage jobs are typically service jobs such as fast-food restaurant workers and retail sales clerks.

"It's a little difficult to see these jobs migrating across the border," he said. "McDonald's is going to be in Illinois regardless."