Augustana Observer

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Augustana Observer

Faculty: minimum wage increase may improve economy

The Illinois Senate passed a bill last month to raise Illinois’s minimum wage to $11 per hour by 2019, which Tristan Coughlin, assistant professor of economics, said would be a step in the right direction.
He said even a raise from the current Illinois minimum wage of $8.25 per hour to $10 per hour would not be enough.
“I don’t think anybody should be working 40 hours a week, 50 to 52 weeks out of the year, and making $20,000 a year,” said Coughlin. “That’s a rough, strenuous way to live.”
Coughlin believes an ideal minimum wage for Illinois and Iowa would be $15 per hour.
“If you’re going to raise the minimum wage, you’re going to help out the folks who are actually living on that wage,” he said. “At the same time, you’re going to benefit the students, the younger folks, who maybe aren’t living hand to mouth; they’re not struggling as much. However, that’s going to give them more money that they can spend on education.”
More money spent on education could then translate to less government funding towards these institutions. Coughlin said this would mean students would not have to take out as many loans, resulting in better advances for students.
Some critics of raising the minimum wage in Illinois argue that it will result in inflation, only causing the price of everything else to rise. A minimum wage increase, according to those opposed, may also result in lay-offs, as companies may not be able to afford to pay their workers.
Joanna Short, associate professor of economics, said she understands all viewpoints of a minimum wage hike, listing job lay-offs as a concern.
“I do worry about the unemployment effects, and who it’s going to harm are people who have no skill (and) want a job so they can learn working skills,” said Short. “So the unemployment rate among teenagers gets a little bit higher. But where are they going to learn the skills of working if it gets harder and harder to get that first job?”
Coughlin said the concern of unemployment, though, is not valid.
“The downfall is possibly that if minimum wage is binding, which means it actually raises the wages above what would normally be paid in a competitive market, and we’re already at full employment, which means that we’re kind of maxed-out in terms of our production capabilities—if that’s the situation, then that could lead firms to have to lay off workers,” said Coughlin.
The economy, especially the local economy, is not very strong, he said.
While Coughlin agrees that some companies may have difficulties finding the money to pay employees larger wages, he said this argument is no longer legitimate today.
“I think maybe that’s true for a very, very small amount of businesses, but the vast majority of businesses that are hiring and paying these low wages are the Wal-Marts, the big corporations—they’ll be okay paying minimum wage,” he said.
Short listed other concerns to a wage increase such as companies implementing more self-checkout lines in stores.
“But the flip side of that is, you figure, well more workers have more money and they’re going to spend that money within our economy,” Short said.
Currently, the minimum wage remains at $8.25 per hour in Illinois, despite former Ill. Gov. Pat Quinn’s executive order this month, just before he left office, to raise the minimum wage to $10 per hour. However, current governor, Bruce Rauner, has the ability to reverse this decision.
During the midterm elections in November, 62 percent of voters said they were in favor of raising the minimum wage in Illinois to $10 per hour.
Chicago has been fighting a minimum wage battle for an even larger hike, a struggle they recently found a solution to. In December, Chicago’s City Council voted to raise the minimum wage in the city to $13 per hour by 2019. It will be raised to $10 per hour July 1.
More people and businesses could move to Chicago if the statewide minimum wage does not match the future $13 per hour in Chicago, which could be a similar concern for residents living on the border of Illinois and Iowa.
Short said if the Illinois minimum wage were to rise while Iowa’s remained at $7.25, this could cause firms and companies to move across state lines.
Illinois is not the only state to propose wage hikes, though. According to the Wall Street Journal, 14 states raised their wage floors in 2014.
The lowest statewide minimum wage in the country is $5.15 per hour in Washington and Georgia; the highest minimum wage is $8.25 in 29 states, plus Washington, D.C.

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Faculty: minimum wage increase may improve economy