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Minimum wage increase will not boost Illinois economy

Raising the minimum wage will not boost the Illinois economy. Businesses must pay competitive wages regardless of the overwhelming support of 2 out of 3 Illinois voters for the non-binding minimum wage referendum in the November .

Businesses cannot base their business decisions on a majority vote of the people. It’s not government’s job to determine the wages paid by private business. Private wages must be competitive or the business will close unless it raises prices; notwithstanding the prevailing wage for government projects.

The General Assembly recently approved the 2015 budget based on the temporary 5% income tax rate, the temporary rate sunsets to 3.75% on January 1, 2015. This lack of legislative action leaves borrowing as the main option to prevent the state from running out of money, if the budget isn’t revised downward or by cutting spending.

A non-binding referendum letting the temporary 5% Illinois income tax rate to sunset to 3.75% would garner a much higher favorable majority vote than those supporting the minimum wage non-binding referendum despite the increased borrowing costs.

So, will the supporters of the Illinois minimum wage referendum be willing to pay higher prices for items produced by these higher wages, especially if wages doubled as demanded by some fast food workers in small franchise businesses? Most would not!

The editorial board of the Chicago Tribune based on Moody’s Analysis wrote on November 17, 2014, “We remain convinced that raising the minimum wage is well-intentioned but economically self-defeating. Everyone would like to see low-paid workers earn more. But it’s the nature of supply and demand that the higher the price of something, the less people will purchase.”

“Force businesses to pay more to their bottom-tier workers and some will find ways to get by with fewer employees — by automating tasks, outsourcing functions or closing marginal operations. With a higher minimum, it’s true, some workers will bring home bigger paychecks — but some will find themselves unemployed.”

It would be, at best, a zero-sum game with some employees having more to spend, while others, let go by their employers, would have nothing to spend.

The nonpartisan Congressional Budget Office issued a report this year that President Obama’s proposal to raise the minimum wage to $10.10 per hour would cost 500,000 jobs in the U.S. in 2016.

Assuming even if jobs are not lost, the costs of items produced would increase, especially if wages were doubled as some fast food businesses employees are seeking, causing higher inflation, forcing other employees to demand higher wages to pay the increased costs of products they would now be purchasing.

Eventually, the minimum wage would have to be increased again, and the process would repeat, with the minimum wage worker again without a livable wage.

The livable wage would also be higher in the Chicago area, as stipulated in the League of Women Voters of Rockford’s column last week. The amount, according to the MIT calculator in the Leagues article concluded that “$15 – $21 per hour would be needed to effectively allow workers to pay bills and put food on the table without using government assistance.”

The minimum wage would forever increase. There would never be a satisfactory amount for those who seek to redistribute the wealth of others. That’s why wages must be based on what is competitive and the work’s value, not an arbitrary wage sought by the powers that be or by a vote of the people unless the people assume some of the business’ risk of failure.

The inflationary cost of fast food and other items would still require minimum wage workers to obtain some government assistance and those losing their jobs would require even more assistance!

Many who do receive an increased minimum wage will simply see their government assistance decrease with their increase in wages with no real gain in net income. So, what incentive is there to work more, even at a higher wages, if government assistance decreases with rising income for a net gain of zero?

The Center for Tax and Budget Accountability referred in the LWV article have never met a tax increase they did not like and lack credibility in this area, since they have not only endorsed making the Illinois 5% income tax increase permanent, despite the governor’s promise, but have endorsed the progressive income tax – redistributing the maximum income tax possible.

Raising the minimum wage will not boost Illinois’ economy or any economy, since there would be little net gain in discretionary income for anyone!

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