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Chicago has just enacted a series of minimum wage changes that are worth watching, simply because they reveal all that is true of the minimum wage debate.
The new rules lift the minimum wage for non-food-service hourly workers from $8.25 to $10 per hour this summer and then progressively to $13 per hour by 2019.
Wages are largely determined by labor markets. So, if the minimum wage is set above the market wage, some workers will lose jobs while some will be better paid. There is no disagreement by anyone with a modest understanding of the matter, but low-paid jobs are not the issue.
Research reveals minimum wage rules can have several effects. In some instances, the minimum wage costs jobs, but in most instances there is no effect. In only one, now largely discredited study, was there a positive employment effect.
Research convincingly details that, in most instances, local minimum wage laws have no discernable effect. The same will be true in Chicago.
There are two reasons: Few work at the minimum wage, and the minimum is typically set well beneath the market wage.
Nationally, only one in 50 workers hold minimum wage jobs, and half are in food service where tips are earned. Of those who hold minimum wage jobs, more than half are teenagers working casually.
If we apply these numbers to the Chicago metro area, perhaps 20,000 adults out of 4.5 million workers work at minimum wage—virtually none in the city.
Second, it is probably difficult to find anyone working at less than $10 an hour in Chicago. In 15 minutes on an employment website, I found no job offering less than $10.50 an hour in the area.
Probably fewer than four of 1,000 working adults in the entire Chicago area now work near the minimum wage.
Of course, these men and women matter. Both they and the work they perform have dignity and value. But if we wish to help them better their lives, as most among us would suggest we should, surely we can figure some better way than the blunt and impersonal minimum wage.
Of course, I am being silly here. The minimum wage is not about helping low-wage workers. It never was. The goal of the minimum wage debate is not to boost incomes of the working poor, or to make business pay the full cost of hiring workers. The minimum wage debate isn’t about lifting all boats or rewarding honest labor.
The minimum wage debate in Chicago is all about Mayor Rahm Emmanuel keeping his job.•
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Hicks is the George and Frances Ball distinguished professor of economics and director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.
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