NCPA - National Center for Policy Analysis


August 7, 2006

The Chicago City Council is requiring big-box stores such as Wal-Mart and Target to pay a minimum wage of $10 an hour and provide $3-an-hour worth of medical benefits by 2010.  Essentially, this creates a $13-an-hour minimum wage, says John C. Goodman, president at the National Center for Policy Analysis.

The result of the mandates, explains Goodman, is likely to be bad news for both employees and customers. 

  • Businesses will relocate elsewhere, taking jobs with them, and denying Chicago consumers the opportunity and convenience of shopping at those retailers without having to drive to neighboring communities. 
  • Those businesses that stay will employ fewer people.

Contrary to the image projected by proponents, minimum-wage workers are typically not primary wage earners, says Goodman.  In fact, a minimum-wage hike will be particularly harsh for teenagers:

  • A 10 percent increase in the minimum wage reduces employment of young workers by 1 percent to 2 percent; a federal increase from $5.15 to $7.25 would, for example, destroy 800,000 to 1.6 million jobs for young people.
  • In the longer term, even as people reach their late 20s, they will work for less and earn less the longer they have been exposed to a higher minimum wage, especially as teenagers, according to a 2004 National Bureau of Economic Research study.

Minimum-wage jobs typically represent the first rung on the employment ladder, says Goodman.  The experiences that workers gain in such simple skills as showing up on time, learning to follow instructions and how to interact with customers are critical to life success.  The city of Chicago will be worse off if the increase comes at the expense of a thriving marketplace and the ability of the city's youths to learn the work skills important to lifelong success.

Source: John C. Goodman "Chicago's mandated wage hike destined to cut jobs, raise prices," Arizona Daily Star, August 7, 2006


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