A group of downstate business owners, including the owner of the Lincoln Theater in Belleville, warned of dire consequences should a $15 per-hour minimum wage hike that passed the Senate last week become law without changes in Illinois.
Several members of the Illinois Retail Merchants Association spoke Monday during a press conference at the Capitol. They warned of layoffs, businesses leaving the state and cutbacks in staff benefits, while advocating for a plan that would make the minimum wage rate $4 lower per hour in downstate counties than in Chicago.
“Treating the rest of the state as if it has the same strengths as Chicago is simply illogical,” said Rob Karr, IRMA’s president and CEO. “No one else has 55 million visitors a year.”
Karr said two-thirds of Illinois’ population is within a 40-minute drive to bordering states, which could cause shoppers to spend their money elsewhere.
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Sandy Schoenborn, who owns the Lincoln Theatre in Belleville, said wages at her business, which employs about 20 people, would go from 26 percent to more than half of her expenses.
“A minimum wage that almost doubles today’s rate, will almost double our expense making it the single largest expense for our business. This does not take into account all of our supply increases we’ll be facing from all of our other suppliers,” Schoenborn said. “My prices will have to double just to keep up. And the people of my community certainly are not going to tolerate an increase of this magnitude. We’ll probably be forced to close like other small businesses of our type who rely on young first-time workers if the bill passes in its current form.”
Don Welge, president and CEO of Gilster-Mary Lee, a family and privately held food manufacturer headquartered in Chester, said businesses will begin doing the same.
“It’s just an open invitation to move operations out of the state of Illinois,” Welge said.
Welge, the Chester businessman, said Illinois already has higher workers’ compensation and unemployment insurance rates than surrounding states, costing $600 more per employee annually than in Missouri.
“Everything we’ve opened up recently has been in Missouri,” he said. “We started in Illinois. We have a lot of loyalty to the state of Illinois, but we can begin to move and we will begin to move.”
As it is written now, Senate Bill 1 would raise the statewide minimum wage to $15 over a six-year period, starting with a $1 increase in January 2020, then a 75-cent increase in July 2020, bringing the wage up to $10. Another dollar would be added to the wage every January until 2025.
The bill also includes tax credits for businesses to help them adjust to the higher wages.
Scot Pirtle, of Belleville is the business manager of Pirtle’s Famous Ice Cream, which has locations in East St. Louis, recently testified to a House Committee in favor of the proposal.
“Tax credits are always great for business and it keeps you from elevating your product out of the reach of people who can and can’t afford it,” Pirtle said. “We won’t have to go up really significantly on our prices.”
The 55-year old business has seen highs and lows of the economy.
They have been through rough patches over the years, “but we’re still here.”
The group of business owners who spoke on Monday said it was not against raising wages, but the current structure — particularly the increase of $2.75 in the first calendar year — was too steep and too quick.
They argued for a regional alternative: a $15 rate in Chicago within five years, a $13 rate in the suburbs within seven years and an $11 rate for downstate communities within five years.
But Rep. Will Guzzardi (D-Chicago), Senate Bill 1’s sponsor in the House, said last week he expects his chamber to pass the bill without further amendment.
“All of us in the House, or at least all of us on the Democratic side in the House, are working to get this done,” he said. “I anticipate us having discussions about the bill that was sent to us, and I suspect that that’s the bill we are going to vote on and I think that’s the bill we will pass.”
State Rep. Jerry Costello II, D-Smithton, said he hopes there will be further negotiation, which would take into account the regional disparity between downstate Illinois and the Chicago area.
“If you look at the economics of Chicago, DuPage County and the collar counties and you look at the economics, especially deep down state …the economics of a $15 minimum wage are just totally different,” Costello said.
Costello, who represents a district that borders Missouri, said he would support proposals being pushed by other legislators that call for a minimum wage of $11 or $12 for downstate Illinois by 2025 or even a longer period that the proposed six years to increase the minimum wage, “so the impact is not so abrupt to a lot of the businesses in downstate Illinois.”
He said the current proposal is better than the original $15 an hour proposals in past years, “but it’s a hard pill to swallow for southern Illinois.”
Sen. Kimberly Lightford, D-Maywood), who ushered the bill’s passage in the Senate, had questions of the constitutionality of a regional rollout and said all Illinois workers deserve equal pay for equal work.
“How do you decide that someone down in Danville, who needs to make $14.60 today, how do you tell them that they should be held lower than $15 in 2025?” she asked in her floor speech during the bill’s passage last week.
But the business owners at Monday’s news conference, including Karen Conn of Conn’s Hospitality Group, which operates retail, lodging and restaurant locations across central Illinois, said these downstate workers could be adversely affected.
“I think there’s a trickle-down effect that’s going to add to the economic pain here,” Conn said. “Our products we buy from farmers, it goes to a processor, it goes to a distributor, it comes to us. There’s going to be four tiers of price increases, so I’m going to be forced to raise my prices.”
Mike Monseur, who also owns restaurants in Springfield, agreed.
“I’m scared for my company, staff and the future of my community and state,” Monseur said. “How much will people be willing to pay for a pizza? I can only raise my prices so much before people stop buying my product. Many businesses like mine will be forced to turn out the lights.”
The group also warned of the compounded effects of added costs from property taxes which could see a spike if schools decide to raise their levies to pay the increased rate to minimum-wage employees.
A pair of downstate hotel owners also warned of raised rates, which would affect rates paid by the state for employees that are reimbursed for travel.
Darin Dame, who owns the Residence Inn in Springfield, said his rates would have to go up from $86 to $125. Michelle McConnell, who owns a Holiday Inn and Suites in Bloomington, said some on her staff could see benefit cuts because of the added cost of business.
For Conn, the cost of the increase will manifest itself everywhere, not just on her menu prices.
“The value of the dollar as it is today isn’t going to be the same as it is in 2025,” she said.
All of this together, Karr said, could prove dire for downstate Illinois.
“This wage increase wouldn’t occur in a vacuum, as tax hikes and added regulations have forced businesses to deal with escalating costs year after year,” he said.
“We’ve said all along that we are open to a compromise to lessen the burden on businesses so they can continue to serve their communities and employ workers. We implore lawmakers to heed these stories for the sake of our state’s economic future.”
Regional minimum wages
Other Midwestern states, with the exception of Michigan and Missouri, have adopted the federal minimum wage of $7.25 per hour, and Illinois employers warn they could leave the state if the rate here is bumped to twice that amount by 2025. Here’s a look at the rates and planned increases of nearby states.
The numbers have been gathered from the National Conference of State Legislators at ncsl.org.
Minnesota: $9.84/$8.06: For large employers, with an annual sales volume of $500,000 or more, the minimum wage is currently $9.84; for small employers, those with an annual sales volume of less than $500,000, the minimum wage is $8.06. Rate sees indexed annual increases.
Michigan: $9.25 currently, increasing annually until it hits $12.05 in 2030
Missouri: $8.60 currently, increasing to $9.45 in 2020; $10.30 in 2021; $11.15 in 2022; and $12 in 2023
Ohio: $8.55; or $7.25 for employers grossing $299,000 or less. Rate sees indexed annual increases based on Consumer Price Index.
Illinois: $8.25 (would hit $10 by July 2020, then increase by $1 annually until 2025 if SB1 passes)
Indiana, Iowa, Kentucky and Wisconsin: $7.25 (Federal minimum)
Source: National Conference of State Legislators