Embattled Illinois governor Pat Quinn will be living on the minimum wage this week.
Well, sort of. Quinn, a Democrat, won’t actually earn the minimum wage — he will continue to pull down the governor’s salary of $177,412, live in the governor’s mansion, and be chauffeured around town. But he will pretend to earn just $79 this week, the amount that activists claim is left from the state’s $8.25 per hour minimum wage after deducting housing, transportation, and taxes.
As someone who actually did earn minimum wage many years ago, right after graduating from college, I can save all these folks a lot of time and effort: It is hard to live on the minimum wage. In fact, I can’t imagine how difficult it must be to try to support a family for any length of time on nothing except the minimum wage.
Which is why it’s a good thing that almost no one does.
The minimum wage is generally an entry-level wage for those with few skills or a limited work history. Few of those who start out earning minimum wage remain at that level for long: Nearly two-thirds will receive a raise within a year.
This has something to do with why fewer than 3 percent of full-time workers live below the poverty line. But, of course, that applies only if they have a job.
Economists are not as united as they once were about the relationship between the minimum wage and unemployment, but the debate is really about details and degrees rather than the underlying basic economics. Virtually everyone will agree that, at some level, a higher minimum wage will result in the loss of some number of jobs. There’s a reason no one argues for a $100/hour minimum.
A minority of economists do suggest that the value of the minimum wage has eroded over the years to the point where a small increase, carefully phased in, would result in little or no job loss. But most tend to agree with the Congressional Budget Office, which put its mid-point estimate for a national hike to $10.10 at a loss of 500,000 full-time jobs.
Any minimum-wage hike would almost certainly have an even larger impact on employment in a state like Illinois that is already laboring under the nation’s fourth most onerous business tax burden. And across the country, Obamacare’s employer mandate is scheduled to finally go into effect next year for businesses with 100 or more employees, and the year after that for companies with 50 to 99 workers. That mandate could add at least $3,000 per year, the equivalent of $1.44/hour, to the cost of hiring a new worker.
Most businesses that pay minimum wage are not giant ultra-profitable corporations like Walmart (which pays minimum wage to just 1 percent of its full-time workforce), but small businesses and franchises. According to a study from the Employment Policies Institute, roughly half the minimum-wage workforce is employed at businesses with fewer than 100 employees, and 40 percent by companies with fewer than 50 employees.
And it’s not as though Illinois has jobs to spare: The state’s unemployment rate is 6.8 percent, well above the national average. Only twelve states are doing worse. Perhaps Governor Quinn should actually be trying to find ways to make it less burdensome for Illinois businesses to expand and hire more workers.
If not, he may soon find himself joining a number of his constituents in trying the “out-of-a-job challenge.”
— Michael Tanner is a senior fellow at the Cato Institute and the author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.