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Zigmund study finds raising the minimum wage would grow Illinois’ population, boost state revenues

Wednesday, Jan 3, 2018

* News Gazette editorial

In a year’s time, many people die — about 33,000 in 2016-17. But births more than offset that; Illinois gained nearly 154,000 new little citizens in that same time frame. Plus, the Land of Lincoln welcomed more new residents internationally than it lost — a net increase of 33,700.

The reason Illinois’ population is falling — while that of most states’, including all neighboring ones, are increasing: More people are leaving than arriving. The state’s “net domestic migration” was a minus-114,779. That’s just in a year’s time.

In the seven years since the last census in 2010, Illinois has seen a net loss to other states of nearly 643,000 people. That’s roughly the combined populations of Champaign, McLean, Macon, Vermilion, Iroquois, Douglas, Piatt and Ford counties.

Why is Illinois losing people while other states are gaining?

* OK, so while I was Googling stuff about the governor’s new budget director Hans Zigmund, I came across a study from the past October that Zigmund co-authored entitled “Dynamic Fiscal Analysis: Increasing Minimum Wage in Illinois.” From the report

Negative effect on employment

    Given that increase in wage is not due to increase in productivity, workforce will be reduced to compensate for increase in labor cost.

Negative effect on Gross Domestic Product

    Higher labor cost & higher cost of goods and services have a detrimental effect on competitiveness. This leads to decrease in exports and business investment.

Negative effect on prices

    Raising labor cost will be translated into higher prices.

Positive effect on Personal (and disposable) income

    Raising minimum wage will increase earnings – personal income- of eligible workers (those that remain employed)

Negative effect on Real personal disposable income

    Given the increase in prices, there is a negative effect on real personal income.

Positive effect on population growth.

    Increased net economic migrants, probably explained by an improved consumption access index in IL and by improved relative real compensation rate in the state.

That last highlighted point is kinda interesting. The study goes on to suggest that some folks would make enough money to get off public assistance programs, lowering state costs.

* And what about state revenues?

The positive effect on personal consumption -due to increased personal income- leads to an increase in Sales Tax revenue.

The positive effect on total wages more than compensates for the loss in employment. The result is an increase in Individual Income Tax revenue.

Hmm.

* Related…

* Downtown growth leads Chicago to highest job peak in decades

- Posted by Rich Miller        

27 Comments »
  1. - Arsenal - Wednesday, Jan 3, 18 @ 11:20 am:

    It makes sense in the abstract; people would like to go to a state where they could get paid more.


  2. - 33rd ward - Wednesday, Jan 3, 18 @ 11:26 am:

    As I’ve been saying for years; raising the minimum wage is the answer to Chicago’s finical crisis.


  3. - SAP - Wednesday, Jan 3, 18 @ 11:38 am:

    To pick one example, Washington state has a minimum wage of $11.50 and is 6th on yesterday’s inmigration list. As 33d indicates, the Chicago minimum wage is significantly higher than most of the rest of the state and it is the only part of the state that seems to be adding population.


  4. - City Zen - Wednesday, Jan 3, 18 @ 11:39 am:

    The increased minimum wage/lower public assistance results only happen if the threshold for public assistance remains constant under today’s minimum wage rules. If it moves with the minimum wage, as many suspect it would, there is no benefit. If there were savings, SEIU and the Fight for $15 crowd would have been praising the benefits long ago.


  5. - Jibba - Wednesday, Jan 3, 18 @ 11:42 am:

    My friend’s HS senior kid earned enough working at the local taco joint to pay his first year of college tuition 20 hours a week at $15/hour. How is this bad again?
    Arcane arguments about efficiency and exports pale in comparison to solving real problems for poor and middle class people.


  6. - Jibba - Wednesday, Jan 3, 18 @ 11:46 am:

    Neglected to say that was in Seattle…


  7. - California Guy - Wednesday, Jan 3, 18 @ 11:51 am:

    Perhaps the reduced taxable income in overall State GDP is made up by the income that is taxed several times by an increased minimum wage (income tax, followed by sales tax). Probably the entirety of minimum wage growth is subject to sales tax because they spend practically all of it on cost of living. An increase in State GDP might only lead to revenue subject to income tax, while higher earners save a big portion of their income.

    Not really sure if Illinois would benefit long term by reducing GDP just to pick up more tax revenue at the expense of low income wage earners, but hey #2018.


  8. - City Zen - Wednesday, Jan 3, 18 @ 11:55 am:

    ==My friend’s HS senior kid earned enough working at the local taco joint to pay his first year of college tuition 20 hours a week at $15/hour. How is this bad again?==

    So the benchmark for minimum wage studies should be high school students working part-time living at home rent free?


  9. - Demoralized - Wednesday, Jan 3, 18 @ 11:59 am:

    So a guy who argued that raising the minimum wage would be a positive thing is now the state budget director? Does Rauner know what his “expert” opinion is? Because that sentiment is completely opposite of the Governor’s thoughts.


  10. - Demoralized - Wednesday, Jan 3, 18 @ 12:00 pm:

    And you can bet that the Democrats will be raising this study the first time he sits down in front of a committee. That ought to be interesting.


  11. - Jibba - Wednesday, Jan 3, 18 @ 12:02 pm:

    CZ…my post is a real world example of the good a higher minimum wage can do. Affording college puts poor and middle class students into loan bondage for decades. That has a social cost, too. Perhaps you can add that to your minimum wage study.


  12. - Chicagonk - Wednesday, Jan 3, 18 @ 12:34 pm:

    Just look at the latest BLS unemployment map by county.

    https://www.bls.gov/web/metro/twmcort.pdf

    Now you would expect the manufacturing corridors along the Rock, Illinois, Mississippi Rivers to have higher unemployment than say a rural Iowa county, but what stands out to me is the higher comparative unemployment in the border communities. Anecdotally, I know a lot of people in Moline and Rock Island looking for homes in Davenport, Bettendorf, and Le Claire.


  13. - Annonin' - Wednesday, Jan 3, 18 @ 1:01 pm:

    If one looked hard at the movers press release that cam out yesterday one would have seen the attached map showed a higher percentage of outbound movers from WI, IN & MO left for jobs than those who left IL. Disrupt the big exodus theory GovJUnk, Proft and others push.


  14. - California Guy - Wednesday, Jan 3, 18 @ 1:26 pm:

    @ Demoralized

    ==So a guy who argued that raising the minimum wage would be a positive thing is now the state budget director? Does Rauner know what his “expert” opinion is? Because that sentiment is completely opposite of the Governor’s thoughts.==

    Take a look at the entirety of the study. What economic purpose is served by increasing the number of State residents at the detriment of GDP, employment prospects, inflation (higher prices), and real personal income? Look harder. Negative effects on real personal income = a lower standard of living. It’s literally stating that we’d be at a net loss in real income. The report makes no justification for a minimum wage increase.


  15. - Albany Park Patriot - Wednesday, Jan 3, 18 @ 2:13 pm:

    Wait-Rauner opposes ANY minimum wage and just vetoed an increase…


  16. - Downstate - Wednesday, Jan 3, 18 @ 2:35 pm:

    The effective minimum wage in our downstate community is approximately 15% higher than the state mandate.

    We did it with job growth among small, locally owned businesses. Had we demanded a higher minimum wage, we likely would have curtailed the expansion and growth that occurred in our local businesses.

    If you have any type of work ethic, there are plenty of jobs well above minimum wage.


  17. - Mix_It_Up - Wednesday, Jan 3, 18 @ 3:32 pm:

    I’m all for minimum wage increase if costs of goods stayed the same. However, this will not be the case. Businesses will increase the costs of goods and reduce staff to compensate. Government will benefit from more tax money on income and sales. They will be the biggest benefactor. Our elderly will suffer because their social security will be worth less in buying power and COLAs will not keep pace.


  18. - Demoralized - Wednesday, Jan 3, 18 @ 4:03 pm:

    ==The report makes no justification for a minimum wage increase.==

    It does state that there would be benefits. That’s not exactly the message of this Governor.


  19. - Rich Miller - Wednesday, Jan 3, 18 @ 4:06 pm:

    ===The report makes no justification for a minimum wage increase===

    “The positive effect on total wages more than compensates for the loss in employment”


  20. - Todd Knock - Wednesday, Jan 3, 18 @ 4:37 pm:

    This concept should be tried on an experimental basis in a large, diverse metropolitan area to determine its effects on the overall economic dynamic of that area. I nominate Seattle…
    Wait, what…???


  21. - Anonymous - Wednesday, Jan 3, 18 @ 4:56 pm:

    Let’s look at the entire report… the REMI findings are clear.

    1. Negative effect on employment
    2. Negative effect on GDP
    3. Negative effect on prices
    4. Negative effect on REAL disposable income

    1. Positive effect on personal and disposable income
    2. Positive impact on population growth

    The comment that “the positive effect of total wages more than compensates for the loss of employment” doesn’t provide food on the table for those workers that lose their jobs. Their neighbors may have a few more dollars but I’m not sure this will satisfy those who lost jobs or had hours cut.


  22. - California Guy - Wednesday, Jan 3, 18 @ 5:23 pm:

    @ Demoralized

    Of course it has a positive effect on wages, it requires them to be higher. The net damage is calculated by REAL INCOME. Real income is the value that your income buys you - correlated to the inflation that the minimum wage increase would cause. As the minimum wage increases, the cost of goods and services also increases. This study is describing an inflationary effects that’s greater than the wage increase. That’s a net loss of REAL income. Yeah, you make a buck or two more, but goods cost three of four bucks more, as a rough example.

    The effect, as identified by this study, is that the benefits would be increased tax revenue, not an increase in the purchasing power of Illinoisans. That increased tax revenue would be at the detriment of REAL income.


  23. - wordslinger - Wednesday, Jan 3, 18 @ 6:41 pm:

    Based on this, a whiz kid like Zigmund should be able to calculate the ROI on Rauner’s agenda lickety-split.

    It’s only been a couple of years since Rauner promised those “revised” numbers to Miller.

    https://www.youtube.com/watch?v=Z0YIJQ1jgEI


  24. - wordslinger - Wednesday, Jan 3, 18 @ 6:44 pm:

    – Positive effect on population growth.

    Increased net economic migrants, probably explained by an improved consumption access index in IL and by improved relative real compensation rate in the state.

    That last highlighted point is kinda interesting. The study goes on to suggest that some folks would make enough money to get off public assistance programs, lowering state costs. –

    I’m shocked that the governor hasn’t been barnstorming the state on this economic growth proposal that his staff has put together.

    I kid. Seriously, where did this come from? Was Zigmund just passin’ the time of day, crunchin’ numbers for kicks?

    I doubt very much that the boss asked him to do it.


  25. - Demoralized - Wednesday, Jan 3, 18 @ 6:56 pm:

    California Guy:

    You’re having some big academic debate. I’m not. All I said is that the Governor hired a guy to be his budget director who authored a study that pointed out the benefits of raising the minimum wage. That sentiment runs counter to what the Governor believes. Now, you can continue this lecture if you want. It still doesn’t mean I’m not right.


  26. - Union Thug Gramma - Thursday, Jan 4, 18 @ 8:20 am:

    SMH, the argument that jobs would be lost and prices will go up has been the same argument conservatives have whined about since 1935. Wasn’t true then, not true now. Oh and this study forgot to include the one on how minimum wage workers will make more than better skilled workers…
    If the poorest workers make more money, they spend it…on food, new clothing, better housing, which in turn, spurs the economy. McDonald’s and Walmart may cry poor, but I’m tired of my tax dollars going to subsidize greedy billionaires that don’t pay decent wages to their workers. Costco seems to be doing just fine without teaching their employees how to get food stamps, like walmart does.


  27. - City Zen - Thursday, Jan 4, 18 @ 9:06 am:

    ==Costco seems to be doing just fine without teaching their employees how to get food stamps, like walmart does.==

    Costco’s revenue per employee is nearly three times that of Walmart, one of the advantages of the bulk sales/warehouse model. I’m not sure they could ever match Costco’s compensation package without a drastic change to their business model.

    This coming from a Costco shopper that doesn’t step foot in a Walmart, mostly for the reasons you cited.


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