Raising minimum wage to $15 would increase tax revenue by $2.4 billion in Illinois AND increase housing affordability

Raising the minimum wage stands to impact Illinois workers’ ability to sustain families and cover expenses including high housing costs. Whether in the form of rent or mortgage payments and maintenance costs, housing costs make up the largest monthly expense for most households. However, a common concern is that raising minimum wage may actually increase unemployment.

Findings from our report The Impact of a Minimum Wage Increase on Housing Affordability in Illinois suggest that raising the minimum wage will not only increases housing affordability, it will raise tax revenue and have minimal impact on employment levels. This report is timely, as minimum wage bills make their way through the legislative process.

IMPACT ON HOUSING AFFORDABILITY (i)

In Illinois, an estimated 43 percent of households with at least one worker earning less than $10 per hour are housing cost burdened (spending more than 30 percent of household income toward housing).

Using three different minimum wage increase scenarios—an increase to $10, $13, or $15 per hour—we determined how many households might be affected in the state and in different regions (Table A). Table B estimates the reduction in cost burdened homeowners and renters resulting from these three minimum wage increase scenarios.

Raising minimum wage to $15 has the greatest positive impact in terms of the number and proportion of workers (1,706,564; 33.8% of the labor force) and in reducing the number of housing cost burdened renter households (114,151) and owners (56,624).

Table A: Number of potentially impacted workers

 

Min. Wage Increase to $10/hr

Min . Wage Increase to $13/hr Min.Wage Increase to $15/hr
Workers Worker Workers
# % of labor force # % of labor force #

% of labor force

Illinois

875,030

17.3 1,366,414 27.0 1,706,564

33.8

Carbondale Region

12,451

19.5 20,311 31.9 25,590

40.2

Champaign Region

23,405

17.4 36,451 27.1 47,488

35.3

Chicago Region

551,862

16.3 864,158 25.6 1,081,807

32.3

Peoria Region

48,617

19.2 74,715 29.5 92,138

36.4

Quad Cities Region

26,316

22.3 38,942 33.1 48,030

40.8

Rockford Region

27,479

21.2 41,887 32.3 60,582

46.7

Springfield Region

30,652

18.0 48,112 28.3 60,582

35.6

St. Louis Region

35,049

17.4 54,870 27.3 69,481

34.6

 

Table B: Change in housing cost burdened households

 

Min. Wage Increase to $10/hr

Min . Wage Increase to $13/hr

Min.Wage Increase to $15/hr

Owners

Renters Owners Renters Owners

Renters

#

% # % # % # % # % #

%

Illinois

-17,011

-5 (-1) -32,615 -10 (-2) -37,393 -7 (-1) -77,504 -17 (-5) -56,624 -8 (-2) -114,151

-21 (-7)

Carbondale Region

-490

-9 (-1) -32,615 -8 (-2) -839 -9 (-2) -1,153 -17 (-5) -914 -8 (-2) -1,203

-15 (-5)

Champaign Region

-241

-3 (0) -373 -11 (-2) -574 -4  (-1) -3,579 -23 (-7) -974 -5 (-1) -4,913

-26 (-9)

Chicago Region

-11,447

-6 (-1) -1,170 -9 (-2) -23,956 -8  (-1) -44,874 -15 (-4) -36,295 -9 (-2) -70,419

-20 (-6)

Peoria Region

-788

-4 (0) -17,403 -15 (-4) 1,564 -5  (-1) -4,677 -20 (-6) -2,326 -6 (-1) -5,225

-19 (-7)

Quad Cities Region

-275

-2 (0) -2,377 -18 (-3) -1,226 -7  (-1) -2,569 -26 (-7) -1,884 -8 (-2) -2,982

-25 (-8)

Rockford Region

-531

-4 (-1) -1,204 -13 (-2) -849 -5 (-1) -3,282 -23 (-7) -945 -5 (-1) -4,062

-25 (-9)

Springfield Region

-556

-4 (0) -2,117 -17 (-4) -1,606 -7 (-1) -3,963 -22 (-7) -2,382 -8 (-1) -5,334

-25 (-10)

St. Louis Region

-517

-4 (0) -2,536 -20 (-4) -870 -4 (-1) -4,604 -23 (-7) -1,756 -6 (-1) -6,732

-28 (-10)

ECONOMIC IMPACT(ii)

While low wage jobs will be lost, a higher paid workforce has more income to spend, which helps generate new higher paid jobs in other industries. The net impact of raising the minimum wage on unemployment in Illinois and the Chicago metropolitan region are fairly minimal.

  • A minimum wage increase to $13 per hour in the Chicago region could result in the loss of 77,100 jobs, but the wage increase for the remaining minimum wage workforce – roughly 1.3 million workers – could lead to creation of an additional 61,700 jobs in other industries – a net loss of about 11,600 jobs across the region or a 0.22% decline in employment.
  • Raising the minimum wage to $15 per hour would likely yield similar results: a loss of roughly 27,500 jobs in minimum wage industries, but a gain of 63,100 jobs in other industries – a 0.67% increase in regional employment.
  • Statewide, we predict that a $10 minimum wage would result in a net loss of approximately 107,000 jobs statewide or 1.41% percent drop in total employment.
  • The employment forecast improves for $13 and $15 state minimum wages. We anticipate that a $13 statewide minimum wage could lead to a net loss of 67,900 jobs – an overall employment decline of only 0.89%.
  • Similarly, a $15 minimum wage could result in net loss of 59,000 jobs across the state, which would be a 0.78% decrease in overall employment for Illinois.

Increased wages will also result in positive tax impacts for local governments, the State of Illinois, and the federal government.

  • Raising the state minimum wage to $10 per hour would result in more than $550 million in additional funds collected in state and local tax revenues.
  • An increase to $13 per hour could result in more than $1.5 billion in state and local taxes collected.
  • A $15 statewide minimum wage could yield up to $2.4 billion in additional taxes.

CONTINUED NEED FOR AFFORDABLE HOUSING

While this report demonstrates that increasing minimum wage will help many working households to better afford their housing, it is not a ‘silver bullet solution’ to housing affordability. Policy must support the production of affordable housing, in particular for those households not in the workforce such as seniors and many individuals with disabilities. Increases to the minimum wage may allow more households to become homeowners. However, lawmakers must ensure that we do not see a resurgence of predatory lending, and programs that support first time home buyers should be available to eligible low income households.

For more details, data and recommendations see the full report.

 

 

(i) Using data from the American Community Survey, we identified which workers in Illinois would be affected by an increase to the minimum wage, and what proportion of these households are housing cost burdened (i.e., spending more than 30 percent of household income toward housing).

(ii) At the state level, we estimated the impacts of $10, $13, and $15 statewide minimum wages. For the six-county metro Chicago region, we estimated the impacts of $13 and $15 minimum wages (Chicago; Cook County).

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