Saturday, January 01, 2005

$6.50 minimum wage in Illinois today -- thanks Rod and IL Dems!

Today, the minimum wage is raised to $6.50 in Illinois.

Now a full-time minimum wage worker makes $13,000. Before taxes.

The federal minimum wage is still only $5.15. That's $10,300 annually, gross.

The $2,700 difference is huge.

And since there is no job loss from a rise in the minimum wage -- none -- this is a big boost for the Illinois economy, since more Illinois residents will have more money to spend.

In Illinois, helping the Illinois economy.

And lots of the corporations that employ lots of minimum wage workers are owned by shareholders all over the world, so if their profit margin shrinks a bit, that's not Illinois' problem.

Raising wages is great for our state's economy.

And we have lots of people to thank for it, but one person who doesn't get a lot of public thanks lately is Governor Rod Blagojevich.

So thank you Rod. If you hadn't found a way to beat the Republican Party for the first time in 25 years, the state minimum wage would not have been raised.

Thanks to the state AFL-CIO, led by Margaret Blackshire, which put a lot of resources into the campaign even though very few of its members benefit from a raise in the minimum wage (people in unions already get higher wages -- that's why they are in unions).

And thanks to all the Illinois Democrats who ran hard, campaigned hard, donated greatly and walked many precincts to take control of the Illinois General Assembly for the first time in at least a decade.

Now, let's raise it again. And index it so it automatically rises with inflation.

9 comments:

Anonymous said...

(duff)

Dan - Point me to the studies showing no job losses due to an increase in minimum wage. I'm familiar with the Jersey/Philly-area study from 1997-1998, but thought that had been discredited due to labor flows btwn PA/DE/NJ. This isn't something I follow closely, so I'm curious what you've got. -- Duff

Dan Johnson-Weinberger said...

Hey Duff. First, I'd reject the burden of proving no job loss as an advocate of raising the minimum wage. Why shouldn't the status quo have the burden of showing a higher standard of living for low-income workers or more purchasing power for low-income workers? Second, my source is the Economic Policy Institute. www.epinet.org and the most recent white paper on the topic is this one: http://www.epinet.org/content.cfm/briefingpapers_bp150 . I imagine you rely on Cato?

FightforJustice said...

The burden of proof is normally on those who advocate change, such as indexing the minimum wage. Isn't it reasonable to ask for an objective analysis of the new minimum before extending it?

Dan Johnson-Weinberger said...

That just invests the status quo with more authority than it deserves. 'The way things are' is more often than not a product of historical accident and distorted decisions from past clout rather than a product of accumulated wisdom. So the defenders of an unindexed minimum wage have as much of a burden of proof as the advocates of an indexed minimum wage (in my view). I just don't think that one group has a greater burden of proof than the other.

Anonymous said...

Dan,

The burden of proof is on minimum wage advocates because simple economics argues that the minimum wage will be harmful. Roughly: if you artificially increase the price of something, people will buy less of it. So, if you artificially increase the price of labor, people will hire fewer workers.

N. Y. Krause

Dan Johnson-Weinberger said...

N.Y.: That's simplistic, not simple. There's no such thing as a 'natural' price. All prices are subject to 'artificial' government 'interference' because property rights exist because of government. Since we already fund a massive state apparatus to enforce property rights, there's no such thing as a 'natural' price. Every 'free' market is the product of particular government policy. All that being said, raising the minimum wage should make almost everyone better off, because it grows the economy. With more purchasing power in the pockets of people, the economy grows. Seems to me that the advocates of a $5.15 minimum wage have to show that their wage level makes the most people the best off relative to a $6.50 and $7.50 wage, just as much as the higher wage advocates face a similar burden.

Anonymous said...

(Duff)

Dan -- Not trying to be argumentative, but surely you know you're making a radical claim; it's just basic supply-demand econ. Heck, you even site the same basics in the post below re: the effect of stadium-related tax hikes on DC-based businesses. I'll read the EPI paper, thanks.

Dan Johnson-Weinberger said...

Hey Duff (send me an email -- I want to catch up). On paper, it's simple supply-demand econ: that's true. In practice, it's a lot more complicated. Maybe employers are paying a lower wage than what they are willing to pay because they can. If the minimum wage gets raised, they'd still hire the same amount of workers, and just raise the price of their goods or take a hit in the profit margin. We don't know. And then there's the Wal-Mart Welfare argument. Check out this post from Paul Goyette at locussolus.com -- once we understand that the feds and the state subsidize low-income workers through the Earned Income Tax Credit, children's health care, housing assistance and probably some education aid, it's easy to see that by Wal-Mart paying an under-living wage, the government is subsidizing Wal-Mart's profit margins! That's you and me, brothah! Here's the post:

For a two-hundred-employee Wal-Mart store, the government is spending $108,000 a year for children's health care; $125,000 a year in tax credits and deductions for low-income families; and $42,000 a year in housing assistance. The report estimates that a two-hundred-employee Wal-Mart store costs federal taxpayers $420,000 a year, or about $2,103 per Wal-Mart employee. That translates into a total annual welfare bill of $2.5 billion for Wal-Mart's 1.2 million US employees.

So life is more complicated than the supply and demand chart. By raising the minimum wage, we might reduce government expenditures. Or we might boost the economy. Or both. And I suspect we would do both.

Anonymous said...

Dan,

Actually, the idea of a "natural price" is irrelevant to the point I was making. I was talking about an "artificial increase" by which, whatever you want to call it, I mean an increase caused by anything other than an increase in demand or a fall in supply. It's true that the real world is always more complicated than any theory, but by this you prove too much. One could say the same of gravity -- there are situations where it doesn't make things fall downward (such as an airplane, or an object in outer space), but it would be unwise to assume that this vitiates the law of gravity in general.

What I'm suggesting, just to be clear, is that the increased minimum wage will not make the economy grow, because it will hurt the little guy. It will very likely increase unemployment, which will reduce purchasing power. You just can't increase purchasing power by passing a law saying it should go up.

You can come up with hypotheticals where the higher minimum wage has no ill effects, but you can also come up with hypotheticals where it is totally disastrous. You can say that the minimum wage subsidizes Walmart employees -- but, on the other hand, if they wind up unemployed, maybe they will be subsidized evem more. Which result do we bank on? The only thing we really know about the situation is that the average result -- the most common one -- will be harmful.

-N. Y. Krause