Illinois Minimum Wage Increase Takes Effect

With the start of the new year, Illinois ' lowest paid workers will see a boost in their paychecks. Illinois ' minimum wage increased on January 1st from $5.50 to $6.50 per hour, the second part of a two-step increase passed by the Illinois General Assembly in Spring 2003. Illinois joins 12 other states and the District of Columbia with minimum wages higher than the federally mandated $5.15. Illinois is the only state in the Midwest with a state minimum wage higher than the federal level.

Prior to the passage of the Illinois minimum wage, CUED provided a comprehensive assessment of the likely economic impacts of a minimum wage increase in Illinois . The report found that the increase to $6.50 will directly benefit approximately 450,000 Illinois workers previously earning between $5.15 and $6.50 per hour.

Some business advocates in Illinois have raised concerns that the minimum wage increase will have a negative impact on the state's competitive position. The CUED study, however, found that the labor-cost increases to Illinois businesses from the $6.50 minimum wage would be small. According to the study, the new minimum wage will result in a total wage-payment increase of just 0.35% for Illinois businesses and a negligible affect on overall employment.

Another argument in support of a higher state minimum wage is the declining real value (inflation-adjusted) of the federal minimum wage. The real value of the federal minimum wage has eroded to near its all-time low, from $8.27 in 1968 to $5.15 today (figures in 2002 dollars). Currently, the federal minimum wage fails to lift most workers above the poverty line. A full-time minimum wage earner in Illinois at the federal rate earned 55 percent of the federal poverty threshold for a family of four, and also fell short of the poverty threshold for a family of two. The new minimum wage will help many of these workers attain improved living standards.

CUED's report is available online at: www.uic.edu/cuppa/uicued

Chicago Jobs with Justice and CUED co-sponsored an event that brought together trade union leaders from India for a forum on the global outsourcing of jobs from the United States to India. V. Chandra, Organizing Secretary of an Indian coal miner's union, and Ashim Roy, representing a coalition of grassroots unions, visited Chicago as part of the New Trade Union Initiative. NTUI is a coalition of Indian unions whose mission is to widen the union movement and to promote better quality jobs and enhanced workers' rights in India . A delegation of Indian union leaders visited 9 U.S. cities in December to address the frequent omission of Indian labor perspectives from the discussions around global outsourcing.

Nik Theodore, Director of CUED, began the session by arguing that U.S.-based consulting companies are driving offshore outsourcing by promoting the idea that businesses need to slash labor costs in order to survive in a global economy. According to Dr. Theodore, many companies are choosing production strategies that use low-cost Indian labor to save money in the short-run, rather than investing in long-run capital and technology improvements in their U.S. operations. Even when a move offshore is not likely, U.S. businesses have used the threat of relocation to win concessions from their American labor force.

Mr. Roy and Ms. Chandra both argued that Indian and American workers need to recognize their common interests. The challenge facing advocates is to build policies around areas where workers' interests converge. An example is the creation of global workers' rights and a workplace standards act, where all workers would have improved employment conditions. According to Mr. Roy, companies are moving jobs to India not only because of lower wages, but also because of the speed-up in work that is possible due to lax Indian labor standards. For example, because Indian workplaces work at a faster pace, call centers create only 1 job in India for every 2 jobs lost in the U.S. Additionally, Mr. Roy and Ms. Chandra argued, Indian workers endure work under intense conditions and employee turnover is rising. Universal labor standards would curtail low-road business strategies and slow the pace of job migration out of the U.S., giving both American and Indian workers time to adjust to new employment conditions, explained Mr. Roy and Ms. Chandra.

Study Finds Pay Disparities Among Illinois Workers

The wage disparity between men and women continues to be a striking feature of the Illinois labor market, according to a new report by the Illinois Department of Labor. The report, entitled “The Illinois Workforce: Identifying Progress of Women and Minorities” finds that women in Illinois earn between 69% and 71% of what men earn for the same work. A gap between men and women's earnings was found in most industries and occupations. Wage differentials are most pronounced in the following occupations: Sales; Technicians & Related Support; Machine Operators & Inspectors; and Executive & Managerial.

Fueling the wage gap between men and women is the growth of contingent and alternative work arrangements, which are expected to become increasingly commonplace. Women are disproportionately impacted by these changes in employment relations, as they are expected to make up the majority of the contingent workforce. The sectors of the economy that are growing quickly and have high projected growth rates are the same sectors that have the highest use of alternative work arrangements. The sectors using the most contingent employment contracts are Construction (31%), Services (12%), Finance, Insurance, and Real Estate (12%), and Transportation & Public Utilities (9%), according to the report. In addition to Retail Trade, these four sectors are projected to have the largest employment gains to 2010. Declining job tenure is also associated with these trends—the lowest job tenures are found in the industries with the highest projected job growth rates.

The report is available online at: http://www.state.il.us/agency/idol/wmbook.htm

WARN REPORT

Every month CUED reproduces the monthly Illinois Worker Adjustment and Retraining Notification (WARN) Act report. The WARN Act requires employers to file notice of plant closings or mass layoffs 60 days in advance of workforce reductions. This applies to businesses with more than 75 full-time employees, where at least 33% of the workforce will be laid off. More information on the WARN Act and the filings listed here can be found online at the Illinois Department of Commerce and Economic Opportunity's website: http://www.illinoisbiz.biz/wia2/warn/warn.html

During December at least 367 workers were affected by mass layoffs or plant closings, which is substantially less than during November, when mass layoffs affected 2,047 workers. In November, ATA Airlines declared bankruptcy and put 158 workers on furlough. The impact of this mass layoff event is starting to ripple through the local economy, with Flying Food Group laying off 106 workers on Chicago 's southwest side this month due to the loss of a contract with ATA. For the month of December the following mass layoffs were reported for the Chicago metropolitan area:

Source: Illinois Department of Commerce and Economic Opportunity , “State of Illinois Monthly WARN Activity Listing,” December 2004.

Generous support for this publication has been provided by the Rockefeller Foundation

Center for Urban Economic Development
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