Chicago Tribune Ignores Experts On New City-Wide Minimum Wage Increase

Chicago Tribune editorial claimed the city council's decision to increase Chicago's minimum wage to $13 by 2019 would drive business to the suburbs where labor is cheaper. Yet, research shows that city-wide minimum wage increases have little to no impact on the movement of the labor force within a state and that wage increase can benefit local businesses.

Chicago City Council Voted To Raise The Minimum Wage

Chicago City Council Voted To Increase Minimum Wage To $13 Per Hour In 2019. On December 2, Chicago's 50-member city council “overwhelmingly” approved a plan to increase the city's minimum wage to $13 per hour by 2019 with only five alderman opposing the measure. Chicago will raise its minimum wage to $10 next year, and increase the minimum wage “by steps of 50 cents and $1” until the $13 dollar an hour mark is reached in 2019. Approximately 400,000 workers in the city will be affected by the increase. [Associated Press, 12/2/14]

Chicago Tribune Claims Higher Minimum Wage Will Force Businesses Out Of The City

Chicago Tribune: Raising The Minimum Wage In Chicago Will Push Businesses To The Suburbs. A December 1 editorial in the Chicago Tribune attacked the new minimum wage increase as “bad policy,” claiming the wage gap created by the hike would drive businesses to the surrounding suburbs:

Emanuel wants to raise the city's wage higher than the state proposal, so he'd like to get an ordinance passed first. Only a handful of aldermen are expected to vote against his plan -- those who want to raise the wage sooner and up to $15 an hour, and a few aldermen who understand the damaging fallout for small businesses that employ people in their wards. A minimum wage gap between Chicago and neighboring suburbs will push some businesses to those suburbs. [Chicago Tribune, 12/1/14]

Research On Similar City-Wage Increases Show The Laws Had Little Impact On The Labor Force

Seattle Income Inequality Advisory Committee: Research Shows Cities See “No Discernible Negative Effects On Employment” After Raising The Minimum Wage. According to a March 2014 report prepared for the Seattle Income Inequality Advisory Committee titled “Local Minimum Wage laws: Impacts on Workers, Families and Businesses”, city-wide minimum wage increases in multiple locations -- Albuquerque, NM Santa Fe, NM San Francisco, CA and Washington, DC -- produced “no discernible negative effects on employment” and no measurable job shift from metropolitan to suburban areas. [Seattle Income Inequality Advisory Committee, March 2014]

CEPR: Minimum Wage Has Little Negative Effect On Employment Prospects Of Low-Wage Workers. According to a February 2013 report by the Center for Economic and Policy Research (CEPR), a review of hundreds of research studies on the minimum wage over the past two decades has shown that such wage increases have little effect on labor (emphasis added):

Economists have conducted hundreds of studies of the employment impact of the minimum wage.

Summarizing those studies is a daunting task, but two recent meta-studies analyzing the research conducted since the early 1990s concludes that the minimum wage has little or no discernible effect on the employment prospects of low-wage workers.

The most likely reason for this outcome is that the cost shock of the minimum wage is small relative to most firms' overall costs and only modest relative to the wages paid to low-wage workers. In the traditional discussion of the minimum wage, economists have focused on how these costs affect employment outcomes, but employers have many other channels of adjustment. Employers can reduce hours, non-wage benefits, or training. Employers can also shift the composition toward higher skilled workers, cut pay to more highly paid workers, take action to increase worker productivity (from reorganizing production to increasing training), increase prices to consumers, or simply accept a smaller profit margin. Workers may also respond to the higher wage by working harder on the job. But, probably the most important channel of adjustment is through reductions in labor turnover, which yield significant cost savings to employers. [Center for Economic and Policy Research, February 2013]

CEPR: Minimum Wage Increases Resulted In More Employment Increases Than Decreases. A March 2011 report by CEPR studied wage increases in San Francisco and showed wage increases had a positive impact on employment:

For San Francisco, Figure 5 pools all the cases for fast food, food services, retail, and all low-wage establishments where the city minimum wage was associated with a statistically significant increase in the average establishment wage. The figure groups the corresponding changes in employment into five categories: a statistically significant decline in employment; a decline in employment that was not statistically significant (at least the 10 percent level); no change in employment; an increase in employment that was not statistically significant (at least the ten percent level); and a statistically significant increase in employment. In San Francisco, employment changes were almost evenly balanced between negative and positive changes. Overall employment increases (14) outnumbered decreases (11); statistically significant employment increases (3) also outnumbered statistically significant employment declines (1). Figure 6 shows the corresponding results for Santa Fe. Again, employment changes were almost evenly divided between losses (11) and gains (10). Twice as many observed employment increases in Santa Fe were statistically significant at the 10 percent level or better (six) as employment declines (three).

[Center for Economic and Policy Research, March 2011]

A Higher Minimum Wage Can Have Positive Impacts On Businesses

Seattle Times: Businesses Benefited From Wage Increases By Reducing Employee Turnover. A report prepared for the Seattle Income Inequality Advisory Committee and cited by the Seattle Times explained that businesses were able to adapt to minimum wage increases partly due to cost savings from a reduction in employee turnover (emphasis added):

What have the effects [of minimum wage increases] been on employment?

Almost none, according to economists at the University of California, Berkeley, who have studied San Francisco, eight other cities that raised their minimum wages in the past decade, and 21 states with higher base pay than the federal minimum.

Businesses absorbed the costs through lower turnover, small price increases at restaurants, which have a high concentration of low-wage workers, and higher worker productivity, the researchers found. [Seattle Times, 3/12/14]

Bloomberg Businessweek: “Higher Minimum Wage? Small Business Doesn't Mind.” In an article on small business' reaction to increasing the federal minimum wage, Bloomberg Businessweek noted that business interests had long been opposed to increasing the federal minimum wage, but “public anger over income inequality deepening and economic research challenging the notion that higher wages suppress employment” has caused many small businesses to support an increase. [Bloomberg Businessweek, 2/21/13; via Media Matters 7/24/13]