Illinois’ increased minimum wage during pandemic will impact local governments, nonprofits

(The Center Square) – Illinois’ minimum wage, which increased to $10 an hour this week, isn’t just affecting business owners, some expect it to impact taxpayer-funded local governments already taking in less revenue because of the response to the COVID-19 pandemic and nonprofit groups who are taking in less money because of canceled fundraising events.

A group called Business for a Fair Minimum Wage said when the minimum wage is increased in places like Illinois, Nevada, Oregon and Washington, D.C., it means more money in the pockets of workers and more consumer spending at local businesses.

Other business groups fought against the increases, saying it will limit hiring and hurt investment opportunities.

Washington University Professor of Finance Radha Gopalan said a higher minimum wage during a time with such high unemployment is bad news for unskilled, or entry-level workers. He said even outside of a crisis like a pandemic, increasing the minimum wage can impact employment in some sectors.

Illinois state Rep. Tim Butler, R-Springfield, said when the bill was being crafted in early 2019 to increase the state’s minimum wage to $15 an hour by 2025, there wasn’t much negotiation. He said there’s an impact on sectors outside of business, like local school district hiring.

“When you look at bus drivers, or lunchroom folks, or things like this, that now they’ve got to figure out how to employ these people or to do the job with less people,” Butler said.

Gopalan said there’s “no silver lining” for local governments by increasing the minimum wage at the same time tax receipts are down. There could be layoffs.

“I wouldn’t be surprised if that happens given the budget deficits that local governments are facing right now,” he said.

Increasing the minimum wage also hits nonprofit groups, some of which Gopalan said don’t have much of a financial cushion.

“So if your wage expenses are going up unless your fundraising is also keeping pace you have no option but to cut down on our scale of services,” Gopalan said.

Butler said fundraising from some nonprofits is not going to keep pace during the pandemic.

“Just for the sheer fact they can’t have fundraisers like they used to or things like that or people not giving the same that they used to because they’re holding onto their money because they’re worried about themselves as well,” Butler said.

On July 1, Illinois’ minimum wage increased to $10 an hour. That was six months after it increased to $9.25. The next increase is in less than six months to $11 an hour and then a dollar more every year until it reaches $15 an hour by 2025.

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