Illinois climbs on minimum-wage escalator
The Illinois Senate approved a minimum-wage increase today, ensuring that the state’s minimum will rise to $7.50 an hour on July 1 and $8.25 by 2010. It’s currently $6.50 an hour.
Gov. Rod Blagojevich plans to sign the bill. In a statement applauding the Senate’s action, he says the increase “will make life better for thousands of working people by helping them keep up with cost of living increases.” What he doesn’t mention is that employers are likely to pass their higher labor costs on to consumers, helping push the cost of living up further.
I mentioned the Illinois bill to Kenneth Troske, the University of Kentucky economist who studied Missouri’s minimum-wage increase and predicted that it would cost the state 18,500 jobs. His first reaction to the Illinois Legislature’s action was to quip, “That’s good for Missouri.” In other words, now instead of merely losing jobs to Kansas and other states, Missouri may pick up some jobs from higher-priced Illinois. (Missouri voters elected to raise the state’s minimum to $6.50 an hour.)
For a review of why the minimum wage is NOT an effective anti-poverty tool, read my columns here and here.
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David Nicklaus has covered St. Louis business for more than 25 years. His column appears three days a week on the Post-Dispatch business page. 
Like most people with a formal education in economics, I agree with David that minimum wages are counterproductive in improving the standard of living of the poorest of the poor. (As a social moderate, I advocate more progressive taxes as a fairer and more effective alternative.)
IF the increase in the minimum wage in Illinois actually improves the standard of living of poor people, then that effect should certainly be measurable in East St. Louis and environs, of ALL places, by the mathematical/economic science of econometrics. Illinois has a number of outstanding institutions of higher education — particularly the University of Illinois, the U. of Chicago, and Northwestern U. — which have the capability to perform such econometric analyses in an intelligent, objective manner. (I acknowledge this as a graduate of Purdue University, just across the border in Indiana, which provides constructive competition in the academic quest to define reality and apply it to real-world decision-making.)
I regard public support for minimum wage legislation as being ostensibly well-intentioned, but fundamentally weasely in that it attempts to improve the lot of poor people by mandating that “somebody else” pay them more money. That “somebody else” is (collectively) businesses of all sizes. Economics recognizes that they will — of necessity — raise the prices of their goods and services to pay the higher wages, and that the people whose purchasing power will be reduced the most by this price inflation are the poorest of the poor. And just as tragically, it is the least skilled, poorest of the poor, who will be forced to compete with one another for jobs such as domestic service and agricultural harvesting that — legally or practically — are not covered by minimum wage legislation.
So, now that “the people” have spoken on how they propose to improve the lot of the poor, let’s utilize the resources that “the people” have allocated to higher education to measure whether or not it works.