Economic Effects of an Illinois Minimum Wage Increase:
An Econometric Scoring of SB 1565
The NFIB Research Foundation released a study showing that an increase in the minimum wage would wipe out 21,000 jobs in Illinois and reduce economic output by roughly $4.5 billion. Moreover, an estimated 67% of the jobs lost would disappear from the small business sector.
The report is based on a well-established modeling program that analyzed SB 1565, legislation currently pending before the Illinois Senate. SB 1565 would raise the minimum wage rate every year by 50 cents plus inflation until it reached a certain “historic” level (approximately $10.65), at which time the rate would go up annually based on the Consumer Price Index. In addition to the wage increases, the bill also eliminates many key exemptions for small business including the youth wage, training wage, and “tip” credit used by restaurants.
Illinois is already at a significant disadvantage because all its neighbors are currently at the federal wage rate of $7.25, a full dollar lower than Illinois. If the bill were to be enacted, Illinois would catapult into the top spot for minimum wages in the country. Assuming 4 percent inflation on the high end, minimum wage in Illinois could exceed $15 per hour in ten years. If inflation remains at two percent, the rate would still top $12.50 per hour.