Local legislators say downstate will be harmed the most and was ignored during debate over the state's new minimum wage law.
Signed Gov. J.B. Pritzker this week, it mandates that the minimum hourly wage in Illinois will be $15 by the year 2025. It would increase the current $8.25-an-hour base wage by $1 on Jan. 1, 2020. After a 75-cent increase July 1, 2020, it would increase $1 each Jan. 1 until 2025, which is an 82 percent increase in labor costs.
According to a recent Associated Press article, Illinois employs thousands of minimum wage workers, many at universities and health care institutions funded by Medicaid. The state would have to pay more under the new law as well, including $230 million in additional costs in 2021 when the hourly wage increases to $10.
With the new law in effect, Illinois is on track to be the first state in the Midwest to raise its base wage to $15 an hour.
State Sen. Dale Righter, R-Mattoon, representing District 55, said the increase adds to the burdens already on Illinois' employers.
"A minimum wage increase only adds to the burdens placed on Illinois’ employers, backing them into a corner, raising costs for consumers and posing a threat to our business sector,” said Righter.
Righter is concerned that residents along the state lines will just take their business to another state.
“In my district, residents will buy their products, utilize services and take their businesses over the state line where costs are cheaper and more competitive," said Righter. “Despite calls for compromise and regional consideration from Republican lawmakers, the Democrat-majority chose to forge ahead and pass a bill that raises the cost of doing business in Illinois while disproportionately harming the small businesses in our communities.”
In a press release State Rep. Darren Bailey, R-Louisville, said that this mandatory wage hike will kill jobs, hurt families and local schools.
“This minimum wage proposal mandates the same wages everywhere in Illinois which does not take into consideration the regional economic differences around our state,” said Bailey, who represents the 109th district. “The cost of doing business is not the same in all parts of the state and this inflationary mandate will cause prices to go up on all goods and services. That will hurt families and seniors on fixed incomes the most on things like milk and bread, as well as energy costs to heat their homes.”
Bailey said Illinois already has a higher minimum wage than most of our surrounding states including, Indiana, Iowa, Kentucky, and Wisconsin: all at $7.25 an hour. Missouri is currently at $8.60. Illinois’ current minimum wage is a dollar above the federal level. Now that it is law, Illinois joins New York and California with the highest minimum wage in the nation.
State Rep. Blaine Wilhour, R-Beecher City, representing the 107th district, called the passage a “textbook poor public policy” and a “microcosm of what is wrong with Illinois government.”
Wilhour said that the central-southern part of the state was completely ignored on this policy.
“I am on the Labor and Commerce Committee that heard this bill and we had absolutely no input on this,” said Wilhour. “This was rammed through with absolutely no effort to compromise. The governor needed this policy for purely political purposes and he clearly put that ahead of our well- being in Central and Southern Illinois.”
Wilhour added that feedback from the district has been overwhelmingly negative since the law was signed on Feb. 19.
“This is bad policy for everyone outside of Chicago,” said Wilhour. “People are very upset that our part of the state is being denied a voice in Springfield especially in light of all the great talk from the governor and democrat majorities about how we are going to work together.”
State Rep. Brad Halbrook, R-Shelbyville, district 102, said the law is bad news for downstate Illinois.
“It's going to hurt those that it's intended to help and be an undue strain on every business, every unit of government and every not -for- profit,” said Halbrook.
Businesses and Workers
Joanna Davies, owner of Fresh Digs in Effingham, said she worries how she is going to offset the cost of the increased minimum wage. She said it may be something she will not be able to afford.
"Bigger businesses ... would just pass that on to their customer, but I’ve got to keep my prices as low as I possibly can with Amazon and Kohl's and all those bigger businesses that can buy in bulk and keep their prices low," Davies said. "I can’t do that, unfortunately, so I can’t pass that onto the customer so I’m just going to have to limit the number of hours of the employees that I do have."
Davies employs two part-time workers who both make over the current $8.25 state minimum wage. Davies said in addition to cutting her employees' hours, she would have to work more in the home decor and gift shop.
Davies said she is concerned that law makers are not seeing the bigger picture when it comes to how the minimum wage hike will affect small, locally owned businesses and even the economy of communities like Effingham's.
"I know it’s over a few years, but I don't know how they don’t expect businesses to pass that on to the customer, and therefore the price of everything is going to go up. It makes no sense to me. I understand in the big city, (it's) OK, but down here in southern-central Illinois, that’s a lot," Davies said.
Davies said the cost of living in Effingham is vastly different from that of Chicago and even closer cities like Champaign. She added that some small businesses are already struggling, so paying employees higher wages may have dire consequences on locally owned shops, eateries and more.
"I’m doing the best I can with what I have here. It’s tricky enough already. I’ll be curious to see how many small businesses close because of this," Davies said. "I think a lot of us are struggling enough already, and to worry about having to pay employees four or five dollars more an hour within five years, that’s asking a lot of us and of our customers if we can tack that onto our prices. I don’t see how I can do it."
Chris Debolt, co-owner of Effingham and Mount Vernon Culver's, said now that the matter is signed into law, businesses will manage the new wages.
“It's about managing it, at this point,” Debolt said.
Debolt added that it is really too early to tell how things will play out, but he said that it's all about doing what is right for the guests and the employees at Culver's.
“We'll just do what's right for the people,” said Debolt. “We are in the people business.”
Debolt said Culver's already pays above minimum wage and that's common in Effingham County, which enjoys a strong economy currently.
Brent McMahon, owner of McMahon Meats in Teutopolis, predicts a negative impact.
“I think it will hurt small businesses, in reality it will affect the consumer as well because the business will have to make up the difference in wages,” said McMahon.
Another local business owner, Emily Debenham at Joe Sippers in Effingham, hopes the new wage will be good for the community and her staff.
“I hope that the $15 minimum wage will be a great thing for a lot of people, including my staff,” said Debenham. “It aligns with one of our goals to provide quality careers to our community.”
But the local coffee shop owner expects the higher wages to “significantly impact our business and we will have to take a deep look to determine how we absorb the additional labor expense over the next 5-6 years.”
Glenda Bunton of Effingham relaxed in Joe Sippers Cafe on Friday afternoon. When asked how she feels the increase will affect workers and businesses, Bunton expressed concern for the livelihood of business owners.
"I'm not sure it will be a good thing because it may put small businesses out of business," Bunton said.
Jaci Roley, 22, of Effingham already works two jobs while attending classes at Lake Land College. Roley said she makes above the state minimum wage at both her jobs at Rural King and Payless ShoeSource, both in Effingham.
Roley said while she is not worried about how the increase will affect her Payless employment as the company is closing all stores, she hopes her pay will be affected at Rural King.
"I feel like it won't affect me since I'm part time right now. I feel like it will affect the full-time employees more. I hope my pay goes up, but I'm not expecting it," Roley said.
Effingham County Chamber of Commerce President Norma Lansing described the wage increase as a "roadblock" that will harm business growth and community development. She said the new law will force business owners to make decisions about their business' futures.
"This significant increase in the minimum wage will require employers to evaluate their operations and, ultimately, determine where and how their business will grow," Lansing said. "We are fortunate to have a resilient business community that already maintains a pay scale above the current $8.25 minimum wage to compete for most workers. The new minimum wage forces increases in other payroll costs as well, and businesses will need to increase prices to stay viable."
Lansing said the chamber is concerned the minimum wage increase will affect the ability of the county's youth to find "meaningful work" and learn skills to make them "valued employees in the future." She added that the chamber of commerce will be working with the business community to accomodate the increases in payroll costs.
According to the Illinois Economic Policy Institute, the impact a higher minimum wage will have on prices will be small. A 10 percent increase in the minimum wage has been associated with a .6 percent in restaurant food prices.
So, it estimates that a $15 per hour minimum wage could lead to restaurant food prices that are 1.5 percent higher in Chicago and 4.7 percent higher in the rest of Illinois.
The ILEPI also expects that a higher minimum wage will increase the economy with increased consumer spending. Raising the minimum wage stimulates the economy through increased consumer demand. By boosting earnings for 1.4 million Illinois workers by about $6,000 per year – and by more in communities outside of Chicago – the minimum wage would increase sales at local restaurants and small businesses, offsetting any initial drops in employment.
ILEPI Policy Director Frank Manzo IV said the minimum wage increase would also allow Illinois workers to match up with the working class in other states.
"Working-class families in Illinois are falling behind their peers in other states," Manzo said. "A $15 minimum wage would boost earnings for more than 1.4 million adult workers across Illlinois."
Restaurant workers will still have to earn their tips, so the new $15 minimum wage would maintain the state’s 60/40 wage-to-tip split, with tipped minimum wage eventually rising to $9 an hour, according to ILEPI. The institute says there is a correlation between a minimum wage hike and a drop in restaurant worker turnover.
Not only does this reduce employer costs of recruiting and training workers, it also improves employee morale and increased the change customers are served by experienced employees, according to ILEPI.
Also, it is believed that at the same time, taxpayer costs for government assistance programs, such as food stamps, would decrease.
However, the local health department administrator said he wasn't sure this early in the process what to expect, when it comes to serving the lower income families.
“It's not really clear,” said Jeff Workman, public health administrator for Effingham and Clay counties. “We haven't really speculated on that. Some are anticipating that it will but we won't know for awhile.”
Effingham Park District Director Jeff Althoff said he worries how the minimum wage law will affect not only Effingham's park district but also all park districts and agencies across the state.
"I cannot speak for the park board, but I personally believe the new minimum wage law will hurt every park agency throughout the state. We do our best to keep fees for programs and activities as low as possible, so you can't increase payroll expenses and not expect for it to have a negative impact on the business and consumer," Althoff said.
Currently, the park district employs around 90 extra staff during the summer that make less than $9.25 an hour, which is the first amount wages are to increase to starting Jan. 1, 2020; these employees work as recreation and maintencance staff and as life guards. The park district has 12 permanent employees that make over $9.25 an hour, Althoff said.
Althoff said because the law is still relatively new, the park district is just now starting to look at how the increase will affect the district overall. He said he does not believe the park district would raise taxes to offset the payroll increase, but Althoff said the district may have to cut back on programs, amount of summer staff hired and even raise program fees.
The bill was introduced by Senate Majority Leader Kimberly Lightford, D-Maywood, in early January. Lightford is responsible for the 2003 and 2006 laws that also gradually increased Illinois minimum wage from $5.15 to $8.25 per hour. Lightford could not be reached for comment.
Note: Data from Illinois Department of Labor
Note: Data from U.S. Bureau of Labor Statistics. The federal minimum wage has not increased since 2009.