Chicago approves $13 minimum wage

The City Council of Chicago voted Tuesday to establish a citywide minimum wage of $13 per hour by 2019. Mayor Rahm Emanuel, a Democrat who faces reelection in February, has championed the increase as a poverty-fighting measure. But critics worry it will drive job-creating businesses out of town.

The ordinance makes Chicago the latest city to join a recent trend of local minimum wage increases. Twenty cities or counties have passed minimum wage laws since 2003, including 11 this year, according to the National Employment Law Project.

Local politicians have pursued municipal minimum wage laws as a way of combatting “income inequality” in urban areas. It also gives them a way to please local voters without waiting for state politicians to pass controversial minimum wage hikes.

President Barack Obama has been pushing to raise the federal minimum wage from its current rate of $7.25 per hour to $10.10. Meanwhile, more than half the states already have their own minimum wage laws set higher than the federal minimum. Last month, voters in Alaska, Arkansas, Nebraska, and South Dakota approved ballot measures to raise their statewide minimums to as much as $9.75 per hour.

Advocates of the laws argue low-skilled workers need a pay increase so they are not perpetually impoverished. They point out the minimum wage in its peak year of 1968 was worth $10.90 in 2014 dollars.

“The minimum wage … really comes down to making sure that your child does not go to school on an empty stomach [or] making sure that you don’t pick between medicine or school supplies,” Chicago’s Emanuel said this week.

Proponents of Chicago’s new wage increase said it would benefit more than 400,000 workers in the city. The National Employment Law Project cites studies that show local minimum wage laws have no discernible effect on employment levels.

But critics of the recent minimum wage increases say the negative effects may be more subtle, decreasing employee hours or making it more difficult for first-time workers to get hired. A 2009 study found “large declines” in part-time jobs and hours at fast-food restaurants in Illinois after the state raised minimum wages.

Michael Saltsman, research director at the Employment Policies Institute, points to a 2007 meta-analysis that found 85 percent of the “most credible” studies show minimum wage hikes cause a net loss in employment for the people the laws are supposed to help.

“Fewer jobs means that people you were trying to assist could instead end up with less opportunity,” said Saltsman. He added that most minimum wage workers live in families above the poverty line, and many are teenagers.

Darren Tristano, an executive vice president at the Chicago-based restaurant consulting firm Technomic, said the city’s wage hike could destroy bottom-line profitability for many restaurants. “There [are] a lot of restaurants that are barely breaking even or losing money,” Tristano told me before this week’s vote. “I think the price of everything will go up, within retail and restaurants, because of the wage increase. … I do believe there will be fewer jobs.”

A handful of Chicago alderman voted against the minimum wage ordinance on Tuesday, including two who run food businesses. They warned that small businesses like theirs might relocate to escape high labor costs.

Nevertheless, the ordinance passed in an overwhelming 44-5 vote. Under the new law, the minimum wage for workers will rise from the current $8.25 per hour (the statewide minimum in Illinois) to $10 per hour next July, and increase incrementally in subsequent years.

Some legislators in the Illinois state capital hope to raise the statewide wage, but Gov.-elect Bruce Rauner, a Republican, said he would only consider raising the minimum wage if the bill was accompanied by other, pro-business measures.