Illinois’ legislature overrode Gov. Bruce Rauner’s veto this week to approve a budget deal that raises state income taxes by 32 percent — or $1,200 for a family earning $100,000 a year.
The lower living standards associated with this dramatic tax hike will only add to the state’s middle-class population exodus. Over the past five years, more than 300,000 residents on net have left the state – by far the most of any state in the country.
Now Gov. Rauner turns his attention to another bad policy passed by the statehouse: a $15 minimum wage. To protect entry-level jobs – which are already threatened by this week’s tax hike – Gov. Rauner should also veto this bill.
A blockbuster new academic study out of the University of Washington demonstrates why a $15 minimum wage is terrible policy. Researchers who were funded by the city found that Seattle’s $15 minimum wage has reduced jobs, job opportunities, and hours among those earning $19 or less – which is roughly Illinois’ median wage.
Crucially, the study also found that the wage hike has reduced earnings for these workers by about $125 a month as hours worked have decreased as the minimum wage has increased.
In short, the study suggests minimum wage increases reduce wages.
While the academic and anecdotal evidence – including a recent review conducted by the San Francisco Federal Reserve – have long shown minimum wage increases reduce job opportunities, the finding that they reduce wages as well should eliminate their last remaining vestiges of support among those who care about helping working Americans.
These aren’t wages and jobs that Illinois can afford to lose. Median wages in the state are flat. Youth employment is down. Less than half of Illinois’ young residents aged 16 to 24 currently hold any type of job, according to U.S. Census Bureau data. In some of Chicago’s South Side neighborhoods, that number falls to less than one in four.
The lack of young people working mirrors a national trend. In July 1986, 57 percent of Americans aged 16 to 19 were employed. Last July that number fell to only 36 percent.
Last year the Congressional Budget Office came out with a report finding that one in six young men between the ages of 18 and 34 were jobless or incarcerated – up from one in 10 in 1980. For African Americans, who are already suffering in Illinois compared to other states on a variety of indicators, this number rises to nearly one in three. The CBO identified the swath of local minimum wage increases as a contributing factor to this youth employment carnage.
This isn’t to say that starter employees in the state don’t need help. In fact, the recently passed budget expanded the state’s Earned Income Tax Credit, which supplements the incomes of working residents, and which economists argue is a much better way to help entry-level employees than destructive and poorly-targeted minimum wage increases. This is a good first step.
Even better would be to come together not over a counterproductive Fight for $15 but in a fight for $50 – as in a fight for $50,000 careers. Such fulfilling careers provide employees with the opportunity to live richer lives beyond a paycheck-to-paycheck existence. This isn’t farfetched. Currently there are six million unfilled jobs in the country, millions of which pay roughly $50,000 or more and don’t require college degrees.
But before workers can get these good jobs they need first jobs, where they can learn the intangible skills necessary to advance in their careers. Cutting off the first rung of an already weakened career ladder by dramatically raising the entry-level wage to $15 would only put these $50,000 jobs further out of reach.
Therefore, Gov. Rauner should issue another veto. This one will stick.