The minimum wage for over 400,000 Chicago employees rose from $11 to $12 per hour on July 1, 2018 because of the city’s Minimum Wage Ordinance. Amid concerns of growing labor costs and consumer inflation, how are employers and employees impacted by the changes?
At The Wood Law Office, LLC, the rights and financial protection of both workers and business owners—according to the Fair Labor Standards Act (FLSA)—are one of our primary concerns. To best understand how Chicago’s Minimum Wage Ordinance impacts employees and employers alike, we have explored the effects of the ordinance since 2015.
Impact on Employees
During the first two years, at least 330,000 Chicago employees saw a 2.5 percent increase to their income. The Ordinance has also been linked to a reducing in income inequality because Chicago’s lowest-paid workers saw their income increase (2.7 percent) higher than their median- or higher-paid counterparts (2.3 percent).
This wage growth has not come at the expense of job acquisition or the growth of small private businesses. Higher income rates amplified consumer demand among low-income households and indirectly created new jobs to offset any direct negative impact on employment.
“In fact, the unemployment rate actually dropped more in Chicago than the surrounding suburbs, which suggests that higher wages for low-income workers helped stimulate job creation across the local economy through increases in consumer spending,” says Robert Habans, co-author of The Effects of the Chicago Minimum Wage Ordinance: Higher Incomes with Little to No Impact on Employment, Hours, and Businesses in the First Two Years published by the Illinois Economic Policy Institute (IEPI) and the Project for Middle Class Renewal at the University of Illinois at Urbana-Champaign.
As the wages in Chicago increased, employment opportunities also grew—positively affecting Chicago’s job market.
Impact on Employers
For many small/mid-sized business owners and employers, evidence from the IEPI study suggests that incremental wage increases has little to no impact on a business’ employment rates or hours. While there is sometimes a decrease in new hires following a minimum wage increase, there is also a decrease in employee turnover during this time as well—helping business owners save on training, staffing and recruitment costs.
While some employers turned to “automated workers” to save money, affected workers found equivalent employment opportunities in other minimum wage positions. This creates a “net balance” between the rate of employee gain and loss—negating most of the side effects of minimum wage increase.
Many Chicago employers have found that the Minimum Wage Ordinance has not affected their ability to hire or retain employees or negatively impacted their profitability.
Contact an Experienced Chicago Employment Law Attorney
Incremental minimum wage increases have had more positive effects for employees and employers than other initiatives have had in the past. However, you may still be wondering what the long-term implications of the minimum wage increase may look like as an employer, or if your rights under the Minimum Wage Ordinance are being ignored by your boss as an employee.
If you are an employer or employee with questions about the Minimum Wage Ordinance, or are concerned that your employer may not be honoring the new minimum wage laws following this year’s increase, contact The Wood Law Office, LLC to discuss your concerns today.