On July 1, Chicago's new $13 minimum wage will begin to phase in, with a bump from $8.25 to $10 an hour. Labor activists, Mayor Emanuel and most aldermen said the new wage will give low-paid workers a much-needed boost, stimulate the local economy and help Chicagoans keep up with a high cost of living.
On the other hand, business interests and a few holdout aldermen warned that such a high increase would force businesses to cut jobs, move to the suburbs or shut down entirely.
The city council voted 44-5 on Tuesday to raise Chicago's minimum wage, which gradually will increase until hitting $13 per hour in 2019 and be pegged to inflation starting in 2020. Tipped wages will go up 50 cents in July and another 50 cents in 2016.
The new wage will affect about 31 percent of Chicago's workforce, according to a report by Emanuel's minimum wage working group-meaning more than 400,000 Chicagoans will get a raise. That population is disproportionately black and Latino, and their median age is 33, according to the report.
Ald. Brendan Reilly (42nd) was one of the "no" votes Tuesday, and reminded his fellow aldermen before the vote that they were not economic experts.
"If we had 50 economists on the City Council, the city's financial condition would be much better than it is today," he said during Tuesday's meeting.
With that in mind, RedEye consulted professional economists to forecast Chicago's business climate over the next few years of wage increases.
Winners and losers
David Neumark, director of the Center for Economics and Public Policy at the University of California-Irvine, would like to remind everyone involved that money does not, in fact, grow on trees.
"The bottom line is, there's winners and losers," he told RedEye. "A lot of the proponents [of a minimum wage increase] like to say that there's no losers, there's no harm, there's just money we create out of nowhere. ... That's not true."
But while he said there likely will be fewer jobs in Chicago for low-skilled workers, those who are employed will have more money to spend.
Employers will pick up the pace of automation in response to the wage increase, said Allen Sanderson, senior lecturer in economics at the University of Chicago.
"I know McDonald's already has the equipment all ready to go in terms of automating your ordering," he said. "At $13 an hour the machine comes in, end of story."
A spokesperson for Oakbrook-based McDonald's couldn't be reached for comment.
Survey says...
When the University of Chicago's Booth School of Business surveyed top economists last year on the potential effects of raising the wage to $9 an hour, they got a very mixed bag. The results were split: 34 percent said a wage hike would make it harder for low-skilled workers to get a job-and 32 percent disagreed. Nearly a quarter of the experts were uncertain.
But the real question is whether any negative effects of raising the minimum wage would be outweighed by the positive effects of giving low-wage workers more money. On that question, 47 percent of those economists said a wage increase would be a good thing overall, and only 11 percent disagreed. About one-third were uncertain or had no opinion.
Will businesses pick up and move?
Neumark said it is unlikely that existing businesses will migrate across the border to the suburbs, as one alderman predicted, to take advantage of lower wages outside Chicago-but new ventures might think twice about where to put down roots.
"If you're deciding where to start a new business, you can be very sensitive to this margin," he said. "Will Wal-Mart open a couple less stores? Conceivably."
Sanderson was less optimistic.
"It's a wonderful city but Chicago located the way it is, with surrounding counties and a neighboring state very close, also runs the risk of city-to-suburbs or city-to-Indiana kind of defections," he said.
Effect on poverty
Both Neumark and Sanderson noted that the effect of the minimum wage on poverty levels would be difficult to determine, considering the way the poverty level is measured.
For one thing, Neumark said, poverty is measured in households and the minimum wage is paid to individuals.
And the federal poverty levels don't take into account every factor it could, Sanderson said, making note of "the tortured way we measure poverty."
Sanderson was unequivocal in his opposition to a minimum wage increase: "I'm just not in favor of laws that make poor people poorer," he said. "It's going to be the lowest end of the chain that's going to lose their jobs."