I live in a bastion of progressive liberalism quite on purpose, and our recent local discussion about whether to opt-out of the Cook County minimum wage hike has provoked an excellent public discussion. I’ve posted bits and pieces on a number of forums, and am consolidating here as part of this and the broader minimum wage discussions.

The issue is being framed here as progressive values versus the ability of current small businesses to survive, and of the community to attract new businesses if other neighboring communities opt-out of the minimum wage increase.

I come down very strongly from a political and economic viewpoint on the need to avoid opting out and increase the minimum wage.

The two recent Seattle studies are contradictory and inconclusive so far, and are really not comparing apples-to-apples because the areas and markets are so different. One says the Seattle increase to $15 is working and having no ill effects, the other shows some problems. Should we pay attention to these studies? Absolutely.  But it’s also too early to make decisions either way based on them, so we need to go with what other evidence we have, along with common sense, and social justice where appropriate.

While I understand the employer-side arguments, these don’t take into account that real growth comes from employees in middle and lower wage levels having more money to spend. When a $10/hr employee now gets $11/hr, it is likely that 100% of this goes back into the local economy — which means more business for those same small businesses that are paying more.

Also, it is true that increasing wages across the largest possible geographic region is an important part of this to eliminate incentives for some employers to jump across local borders. Personally I think this needs to be a national increase for that reason, but I’m not holding my breath. And yes, the state of Illinois SHOULD do this, but in its current political condition it won’t. Locally, Oak Park can still do the right thing and push the trend along, trying to put pressure on others to move this up to larger branches of government.

One factor for businesses to consider is that moving is probably very short-sighted in this case — they may increase margins short-term, but will have new start up costs to consider, and the likelihood of minimums rising across the board is very high in the future. The question is likely when, not if.

The textbook econ on this (costs go up and businesses leave or choose other locations) often doesn’t work that way in reality, especially in a place like Oak Park, where our per capita income is almost 50% over the state average. Small businesses that pay near minimum wage (restaurants, dry cleaners, etc.) certainly have to take price into account, but there are MANY other things that drive customers to and away from them. Quality, friendliness and word of mouth are often much more important.  For instance, I’m not going to change weekend breakfast places or hot dog joints b/c they raise their prices to cover an increased salary, esp. if they tell me that the increase is going to the employees. I like their food, I like the people, and I’m going to keep going there. Even people with low end incomes tend to do this with disposable income, although they may make less trips/month – but if their low end income is also going up, then… The economics are a LOT more complex than the simple textbooks examples show on this one.

Automation has also been mentioned as an issue, because it could provide an incentive for employers to eliminate some low end jobs. Will there be some automation? Absolutely. But unless that automation wipes out all of the lower end jobs, there should still be a net benefit in the local economy. Also, we’re facing an automation economy regardless of whether wages go up, and we need to figure out ways to adjust to that outside of this discussion.

There are tons of actual stats on this type of thing in areas that increased minimum wages, not just the two Seattle studies. My understanding is that not only did it not drive businesses away, but in several west coast areas there were pleasant improvements to the economy. Again, wages driving up prices is just one factor in the equation of where people shop and whether some businesses move or can’t survive. It’s the one we hear about in the press a lot (typically as a scare tactic by people who are opposed to living wages, I don’t think you’re in that category so I’m not accusing here at all!), but that does not make it the only factor, and possibly not a determinate factor.

Here’s a good resource that gives the back and forth on the debate. Several year old data suggests that jobs are typically not lost, although it doesn’t address the immediate border issue. And there’s a lot more data out there now, although I didn’t find a study at a quick glance. https://journalistsresource.org/studies/economics/inequality/the-effects-of-raising-the-minimum-wage

Bottom line: more wages for the lowest wage employees helps both those individuals, and the local economy.  And it’s the right thing to do, regardless of whether our neighbors follow suit. The econ evidence against this is inconclusive at best, and Oak Park can be a leader, not a follower on this one.