South-Western - Management  
Small Business Owners Balk at Illinois' New Minimum Wage
Topic Human Resources Management - Entrepreneurism
Key Words Minimum wage
InfoTrac Reference CJ102688764
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News Story 

Illinois’ proposal to raise the state’s minimum wage above federal levels may stop small business owners from adding workers or worse. The proposal raises the minimum wage from $5.15 to $6.50 over the next 18 months.

One small business owner said that the things for which he hired someone at minimum wage either won’t get done or will be done by machine. He feels he won’t hire people for $6.50 an hour with no skills or work experience.

Illinois will become the 12th state to increase the minimum wage above the federally mandated level of $5.15 established in 1996.

About 450,000 workers, or 6% of the Illinois workforce, earn between $5.15 and $6.50 per hour and will benefit from the increase. About half of those earn the current minimum wage. About 60% of the minimum and near-minimum wage workers in Illinois are female. The average is 31. The industries most affected where workers earn less than the proposed new wage include:

  • 58% of restaurant workers
  • 39%of gasoline service station attendants
  • 34% of people working in movie theatres
  • 32% of those working for grocery stores

The Illinois director of the National Federation of Independent Businesses feels increasing the minimum wage above federally mandated levels is bad policy because it will result in lost jobs. There is also a concern that it will increase pressure to raise all hourly wages within the state, though there is no evidence of a ripple effect in other states.

Questions
1.

Explain how the federal minimum wage law works. You will find information on it at the U.S. Department of Labor website.

2.

Why are small business owners particularly concerned by this new minimum wage?

Source "Small Business Owners Balk at Illinois’ New Minimum Wage," Knight Ridder/Tribune Business News, June 3, 2003.
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