Minimum wage increase would be a blow to unskilled workers

Illinois already has the fourth-highest minimum wage in the nation and is one of 19 states with a minimum wage higher than the federal rate of $7.25 per hour. But the state’s current rate of $8.25 isn’t enough for Illinois lawmakers, who want to increase the minimum wage to $10.25 an hour. Efforts to increase the minimum...

Illinois already has the fourth-highest minimum wage in the nation and is one of 19 states with a minimum wage higher than the federal rate of $7.25 per hour. But the state’s current rate of $8.25 isn’t enough for Illinois lawmakers, who want to increase the minimum wage to $10.25 an hour.

Efforts to increase the minimum wage often sound compassionate, but the sad reality is that these wage increases end up hurting the very individuals they’re meant to help.

A recent Crain’s article provides an example from a restaurant owner to show why increasing the minimum wage is bad policy:

Labor is the biggest single cost component in a restaurant. A 20 percent increase in labor cost would wipe out the slim margins we’ve been able to maintain since the Great Recession. Most restaurants operate on single-digit profit levels, and a struggling business will not be able to afford higher wages. Many observers would suggest raising prices to offset the higher costs. But when demand is lagging, the last thing you should do is give customers another reason not to spend their money. In this environment, higher prices will not lead to greater sales. More likely, employers will limit worker hours to keep costs in check. If an employee makes 20 percent more per hour but works 25 percent fewer hours, the employee is not making more money.

Whether it’s through reducing the number of employees or the number of hours worked, the simple fact is this: Increasing the minimum wage prices unskilled workers out of the labor market.