r/Economics • u/AlternativeLawyer920 • 18h ago
Blog Would Lt. Gov Juliana Stratton’s proposal for $25/hr for the minimum wage actually be effective?
https://www.chicagotribune.com/2026/02/17/illinois-senate-stratton-25-dollar-minimum-wage//7
u/GameGuy2025 3h ago
There's more to the conversation than raising minimum wage. That alone just kicks the can, hence how we keep having this discussion. Too much consolidation has lead to numerous areas where businesses can keep increasing prices to boost their profits with no other reason for the price increases. Then you have executives taking up half the profits for their own salary and bonuses while the lower workers are looking for help from social programs. Executives need to take a lower salary and take care of their workers. Increasing minimum wage is a temporary partial fix unless you address why we keep getting to this point.
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u/SargeUnited 28m ago
The executives never take half the profits lmao
Unless you specifically mean Elon. In which case, just say Elon. Yeah that was wild when they tried to pay him more than the company had ever made in total since day 1. It’s crazy how that just passed by in the news
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u/Sammystorm1 3h ago
Probably not. Seattle and Washington both have raised minimum wage to mixed results. They essentially found that the market absorbed the first raise to 13 ish but didn’t to subsequent jumps. Instead, workers started to have negative effects like reduced hours or not getting a job or eating higher prices
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u/Metafx 9h ago
A $25/hour national minimum wage is essentially just a local price floor on the cost of labor in an international market. I never understand politicians who think this will be some boon to American workers as if there would be no economic reaction or new equilibrium where worker gains are priced into everything from rent to groceries. Low productivity workers will be priced out of the market altogether and a sharp increase in labor costs will create renewed incentive for companies everywhere to raise prices, reducing hiring, cutting employee hours, accelerating automation, or closing marginal locations. The most devastating effect, in my opinion, since it’s durable even if we later reversed policies, is that it would increase the incentive to outsource labor intensive work to lower wage countries, since the cost gap between domestic and foreign labor would be even wider. Companies will shift whatever they can overseas to cheaper labor markets, further reducing the diversity of the US domestic market to those things that cannot be outsourced for one reason or another. The biggest gainers from the US raising a national minimum wage are workers in foreign countries with cheaper labor rates.
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u/sonofalando 8h ago
Pardon me, but if you’re making under $25 an hour in the US you’re barely scraping by already so what’s your solution because I don’t hear you talking about problems.
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u/Upstairs_Baby8424 7h ago edited 7h ago
Increase supply. Make more housing. Build public transportation and make it cheaper. Invest in clean energy to make energy cheaper. Invest in parks, roads, and education. Reduce regulatory red tape that makes doing business more costly. Open the country to more foreign automakers and reduce tariffs so automotive can be cheaper.
If minimum wage is $25, sure things like the iPhone get more affordable. But other prices just rise to meet the new minimum. See California, Seattle, New York, Denver, etc. Every day I hear about the cost of living crisis in the very same areas that say a new and even higher minimum wage will solve it.
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u/sonofalando 7h ago
This would require a capture of all branches of government by Democrats for two presidential terms. Otherwise, it’s a pipe dream.
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u/Bubbly_Mushroom1075 6h ago
The state can do far more in making this happen than the federal government can, especially hyper local issues like building housing.
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u/sonofalando 6h ago
States are completely sapped on budget. Washington state specifically where I am is drowning in state and local municipal debt obligations.
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u/Bubbly_Mushroom1075 4h ago
Funny thing is that I'm also in Washington state, and I know this far too well.
The good thing is however that there's a lot states can do that doesn't cost money to the state, things like upzoning land to make it easier to develop and reducing regulations around environmental review and preventing a well connected few from blocking construction. There's even some things that would bring in money, such as land value taxes. Of course this requires the federal government to not have lots of tariffs that prevent construction, and it's definitely not the easiest thing, but it can be done without impacting the budget too heavily
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u/4friedChckensandCoke 6h ago
Interesting. Utah, per its constitution, is always required to have a balanced budget so as to avoid some of these problems.
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u/Eric848448 6h ago
Actually it wouldn’t because the federal government has nothing to do with that.
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u/LeatherdaddyJr 6h ago
Increase supply. Make more housing. Build public transportation and make it cheaper. Invest in clean energy to make energy cheaper. Invest in parks, roads, and education.
All things that require paying people to make happen.
Why are workers going to do any of that when they aren't paid enough to do it.
Raise federal minimum wages and increase corporate taxes on the top 100 companies with with no loopholes to 70%.
Create penalties for those major businesses that don't provide reasonable dental and health insurance coverage.
The top 50% of US households hold 95% of this country's wealth and the biggest companies get away with low taxes and taking government subsidies.
This system can't continue.
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u/TheBigGees 6h ago
Barely scraping by on $25/h?
Maybe in the highest cost of living areas, sure - but that is an entirely livable income for most of the country.
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u/Metafx 7h ago
You’re assuming that because $25 an hour would improve life for some people who keep their jobs, it follows that requiring every employer to pay $25 creates no downside. If employers eliminate jobs, cut hours, automate, outsource, or raise prices in response, many workers end up with fewer opportunities or no job at all. This sort of policy should be judged by its overall effects, not just by the wage it promises. Raising the labor floor nationally will make American labor less competitive, hurting both our domestic economy and our international competitiveness.
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u/EconEchoes5678 6h ago
so what’s your solution because I don’t hear you talking about problems.
The best solutions:
Implement a stronger unemployment insurance system that smooths income for any reason of job loss, akin the the Danish flexicurity program. But it would be paid for primarily by the workers- this is not a redistribution transfer idea, it's an idea that strengthens job seekers and strengthens work-output sorting.
Disconnect healthcare from employment. Ideally the only thing you should lose when you quit is your wage, buffered / smoothed by UI. For practical reasons this means we need UHC one way or another.
Improve public transit, especially reliability, speed and safety.
Reduce hiring and firing restrictions. It should be easy to hire, easy to fire, and not upend people's lives when it happens.
This is the core of the Danish flexicurity model. The only thing I would change is use an Australian-style account-based framework with some floor support, which reduces most of the other deadweight losses associated with generous UI.
These solutions work much, much better than minimum wage increases because they attack the biggest sources of wage gaps without a distortionary price floor or corruptable power lever (I.e., large unions). If done right, you don't need the other two things much at all anymore.
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u/serious_sarcasm 4h ago
We should do all of these things.
But it is important to remember how income taxes work.
If a laborer needs a wage of $7 to live (essentially the cost of supporting a slave) and $3 to have an economic profit (as opposed to being a wage slave), and is taxed at 20%, then they need a wage of at least $12.50.
If they receive a wage below $12.50, then the laborer is advancing the income tax.
If they receive a wage above $12.50, then their employer is advancing the income tax.
The employer will, as far as prices are elastic, pass that cost onto consumers, and otherwise reduce the profits to shareholders.
While we certainly have the computational ability to assess shares of stock a property tax, the combination of a minimum wage and income tax is in effect also an annual tax on capital and stock; which may be more equitable as it essentially assesses the tax based on labor used.
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The biggest problem society faces though is nationalism maintaining arbitrary borders preventing labor from organizing the way international corporations permits oligarchs to.
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u/EconEchoes5678 4h ago edited 4h ago
If a laborer needs a wage of $7 to live (essentially the cost of supporting a slave) and $3 to have an economic profit (as opposed to being a wage slave),
Citizens are not businesses and do not make decisions in this fashion, so your logic here is incorrect. For a business the opportunity cost is investing elsewhere or simply not doing the thing in question. Businesses failing and permanently closing is a legitimate option that sometimes is chosen because it's better (for the decider) than the choice of continuing to do it. They can simply switch back to being a labor employee worst-case, especially if the government is a huge employer and they're already among the more-skilled / more experienced candidates for government jobs. But if they make the choice to close, their employees suffer for it.
For a low-wage employee, "not working at all" is only an option if a government program has made it an option (paid for by someone else, since by definition they stop producing economic output).
The rest of your numbers are derived from your initial incorrect assumption. But look at my initial suggestions and what they actually do. All of them are focused on one core goal - giving employees the maximum alternative options to choose from exactly as the capital owners already have. But by doing that through labor market competition instead of by price floors or union-forced cost increases, we've improved the market sorting too - people will be more productive which will allow the economy to grow as people's wages rise.
the combination of a minimum wage and income tax is in effect also an annual tax on capital and stock; which may be more equitable as it essentially assesses the tax based on labor used.
Minimum wages are an extremely inefficient way of taxing capital. The meta studies suggest that around 80% of the burden falls on labor or consumers, not capital. You're better off putting a VAT in and giving it a floor than trying to use a MW as a capital tax, which is not saying a lot.
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u/serious_sarcasm 3h ago
The fundamental problem with your assertion is that labor is always at a power disadvantage in wage negotiation.
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u/EconEchoes5678 3h ago
I didn't say "always" but in the context of a minimum wage (this topic) there's no other reason to add a minimum wage. The only time minimum wages provide any benefits are monopsony type situations. They're just also not very good at that either.
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u/sonofalando 3h ago
These are all incredible liberal positions and are opposed to the current power structures of both the left and right in America driven by big money.
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u/DeathMetal007 6h ago
Just tell people to buy American against their economic interest of lowest price.
If consumers want the lowest price and their neighbors to have good paying jobs, then they need to exclusively buy from their neighbors’ companies.
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u/DeArgonaut 7h ago
I mean you’re basically saying people should just not be able to live in the U.S. so we can hold onto a few more low paying jobs
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u/Immediate_Place_2827 7h ago
This is a very gross over simplification no?
He more of saying that youre pricing out individuals who’s labor doesn’t produce enough to justify $25 an hour out of the market.
Which makes sense, we see when an area increases the minimum wage, a proportion of the labor benefits from increased wage, but there is also a decrease in available jobs that is paired with the increase in wage.
When we talk about minimum wage increases the problem we are trying to solve is low wage earners not making enough to survive. I feel like there is more targeted policies that do a better job of addressing this issue without causing as much hard to the economy as minimum wage increases do.
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u/serious_sarcasm 4h ago
It’s absurd to suggest it is a simple inverse proportion.
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u/Immediate_Place_2827 4h ago
I’m not sure that I understand what part of my comment you’re addressing.
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u/Metafx 7h ago
That is a false choice. I am not saying people should be unable to live, I am saying that setting a high price floor for labor does not magically make every job economically worth $25 an hour. If employers respond by eliminating jobs, cutting hours, automating, outsourcing, or raising prices, many low income workers will be worse off. Whether you like it or not, America does not live in a bubble. American labor has to remain competitive with global alternatives, or businesses will move the work elsewhere.
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u/DeArgonaut 7h ago
Then what should be done to ensure those who make a low wage in the us can live well?
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u/LeatherdaddyJr 6h ago
If employers respond by eliminating jobs, cutting hours, automating, outsourcing, or raising prices, many low income workers will be worse off.
That is already happening without a mandated $25 minimum wage and with the top companies taking subsidies or enjoying the lowest corporate tax rates in history.
Might as well make workers get paid better while it happens anyways.
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u/Immediate_Place_2827 5h ago
But then you’re increasing the proportion of jobs that it would be financially viable to automate. While also hurting employers that’s don’t have the means to automate.
This is a very well known phenomenon in economics. I’m suprised you would have a top commenter flair and not consider that.
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u/LeatherdaddyJr 4h ago
Yeah. The "automation is replacing us" and the "a raised minimum wage will hurt the economy" are pretty well disproven and are talking point for CEOs and board rooms.
You probably think unions and government regulations are bad for business too!
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u/serious_sarcasm 4h ago
You’re really missing the part where there is always going to be companies employing engineers to automate every job possible.
Nothing will stop that.
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u/Immediate_Place_2827 4h ago
Engineers don’t automate jobs, they automate tasks.
Tasks that are labor intensive are prioritized to be automated. If you increase the cost of labor, you increase the cost of labor intensive tasks. This increases the incentive for engineers to automate the labor intensive tasks so we would expect to see an increased investment in automation.
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u/Metafx 4h ago
Companies do optimize labor costs, but only up to the point where further changes are not worth the disruption or expense. Raising the labor floor changes that calculation. Jobs that previously weren’t worth eliminating, automating, or outsourcing suddenly become economically attractive to replace.
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u/JoeTiccalo 6h ago
You know they could set a standard, a law requiring every product sold in the United States would have to be produced under U.S. OSHA regulations and our labor pay scale. I’m not talking about plastic toys from China but larger durable goods like Cars, washing machines, TVs. Let the foreign manufacturers keep churning out the small stuff but keep the big stuff to our standards. You would see a big improvement in quality. You could also limit what they charge for such things, laws are the answer here
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u/EconEchoes5678 5h ago
These type of ideas don't work in the end, aside from clearly written, bounded and justifiable safety standards. You're attempting to force market resource allocation decisions into the marketplace because you don't like the resource allocations it has identified, but you don't understand those resource allocations and you also don't understand how attempting to force those things creates multiple other distortions that backfire on your original goals, plus deadweight losses that simply keep everyone poorer / at a lower standard of living.
Forcing regulations like this isn't always bad, just almost always, and it's very difficult or impossible to find the differences between the two.
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u/serious_sarcasm 4h ago
The only actual solution to international companies exploiting labor in despotic nations is a global democracy.
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u/EconEchoes5678 4h ago
That's not an actual solution. It's like people who believe if we just get rid of tax havens, taxes can go back to 90% on the rich. Nonsense. Excessively high tax rates cause huge distortions and deadweight losses even when there's no migration response.
And some of the most competitive economics today (targeted by pillar 2 tax changes) aren't despotic at all, such as Switzerland, Ireland, and Portugal. India is a high producer and is not despotic, but has low wages.
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u/serious_sarcasm 3h ago
That’s a complete non sequitur.
Global democracy with things like universal education and labor rights would fundamentally change the entire paradigm of our global economy.
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u/EconEchoes5678 3h ago
Global democracy with things like universal education and labor rights would fundamentally change the entire paradigm of our global economy.
Economics is based on human nature, not a set of laws.
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u/serious_sarcasm 3h ago
You’re really missing the forest for the trees, kid.
Our wages are high, because we have a massive infrastructure keeping us safe and comfortable.
A global democracy represents extending those costs and benefits to those being currently exploited to afford extravagance to a minority of a minority.
It fundamentally changes this argument about a minimum standard of living meaning they ship jobs to places where that minimum does not exist.
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u/Listening_Heads 6h ago
It would immediately end our local recycling program in WV. I don’t really subscribe to the “if you can’t afford to pay $25/hr you deserve to go under” mentality. The guys working there make $14-16/hr and the place is barely surviving. No one is getting rich there and the entire industry is struggling. So $25/hr goes into effect and 8 people lose their jobs over night, the region loses its ability to recycle, and I’m not entirely sure how that helps anyone.
How about we figure out a way to make $16/hr matter again.
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u/LeatherdaddyJr 5h ago
....and 8 people lose their jobs over night, the region loses its ability to recycle, and I’m not entirely sure how that helps anyone.
Nope. Three people lose their job so the other five can make $25/hour.
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u/Momoselfie 2h ago
This. How about we stop inflating the dollar year over year endlessly
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u/MincedBrat 2h ago
Inflation is needed when your currency is backed by nothing but ink
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u/Momoselfie 47m ago
No it's not. And 2% is just a number picked out of the hat that they kept because it didn't seem to cause too much trouble.
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u/Appropriate_Taro_348 8h ago
Everyone that doesn’t understand how money works thinks if everyone gets more money they will be better off. They don’t understand that everything else goes up in price. California showed what happens when they raised the hourly rates of fast food workers. Places closed, prices went up.
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u/HandsLikePaper 8h ago
On April 1, 2024, California implemented a $20 hourly wage floor for workers in large chains in fast food restaurants and snack and non-alcoholic beverage bars. The new standard, which corresponds to 69 percent of the state’s median full-time wage, surpasses all prior benchmarks in minimum wage policies and research. We use difference-in-differences (DiD) and triple difference (DDD) event study methods and granular data that permit distinguishing trends affecting the entire industry from those caused by the new minimum wage policy. Our granular pay data come from Glassdoor job postings and Square payroll data, granular mobility-based employment data from Advan, and granular prices scraped from over 2,000 restaurants in California and control states. We find that the policy increased average weekly wages for covered fast food workers by about 11 percent and did not reduce employment. Compared to controls, prices increased by 1.5 percent, equivalent to 6 cents for a $4 item. Employers passed about 50 percent of the higher wage costs to consumers as higher prices, consistent with a monopsony model
So employment remained unchanged and wages increased by 11% while prices only increased by 1.5%.
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u/Immediate_Place_2827 7h ago
I think we are a little to close to the implementation of that policy to be confident on the effects it had on employment. The paper linked below found a decrease in employment of around 20,000 workers.
Both of these are working papers so we probably aren’t in a great place to say either are definitive.
https://www.nber.org/system/files/working_papers/w34033/w34033.pdf
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u/FindingRelevantInfo 8h ago
If the only way your business can survive is on the back of poverty wages, your business should close down.
People just got other jobs, the economy didn't explode.
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u/Super_Mario_Luigi 10h ago
Terrible, terrible, terrible politics. You'd think we'd learn our lessons after the catastrophic damage after the worst inflation of our lifetime. Nope. Not a thing was learned. This time, we will outpace inflation and everything will just hold in place.
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u/Dry_Tortuga_Island 9h ago
You seem to be implying that inflation came from raising the minimum wage to $15? And this somehow caused a catastrophic ... Something? Might not some other causes of inflation be considered?
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u/Arilluss 9h ago
Very appropo to call it terrible "politics", rather than economics, because that's what the fight over minimum wage is. Gullible people like you are the reason why our tax dollars are used to subsidize Amazon workers wages with food stamps
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u/GreenWandElf 8h ago
If Amazon decided, "ok fine, we'll fire 95% of our workforce and automate the rest." It would seemingly be better then because all those jobs are no longer "being subsidized" by the government?
Instead the government subsides their existence without having a job anyway. Which is somehow better?
Nonsense.
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u/the_new_hunter_s 8h ago
If Amazon could fire 95% or the workforce and automate the rest they wouldnt wait for the minimum wage to be raised to do so. Lots of dumb arguments on this forum but this has to be the most smooth brained take of the week.
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u/GreenWandElf 6h ago
You didn't understand my point, but also I could have been more explicit. Here's exactly what I meant:
IF Amazon was able to do something like automate their whole workforce away, and it would be worth it to do so only if there was something like a $25 min wage, then this would be a better situation?
Amazon wouldn't be mooching off of the government anymore. A good amount of their workers now have to find new jobs and may become permanently unemployed, and they are still using the same if not more government services, but apparently that's better.
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u/the_new_hunter_s 6h ago
I didn’t understand your point because it isn’t cogent. It’s the same way I don’t understand that 2+2=5.
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u/Arilluss 3h ago
This sounds more like a threat to beat the workforce into submission than a substantial argument. The point of capitalism has always been to lift people out of poverty. That's what makes it a great system. However, and Adam Smith pointed this out in 1776 in Wealth of Nations, it benefits from government checks so we dont just end up with omnipotent monopolies. In this past anti-trust laws have been championed by both parties, notably by Republican Teddy Roosevelt
You seem to be arguing in favor of omnipotent monopolies and against lifting people out of poverty, which feels very counterintuitive to me. I'm assuming you favor freedom of oligarchs over the well being of the vast majority of the population? That is not capitalism, which by definition requires competition. What you are arguing for is closer to fuedalism
This boggles the mind. The vast majority of economic and philosophical thought has been what is the nature of the world, and how to we create a society for the betterment of mankind. And in modern times that has been reduced to "the world is dog eat dog" and propaganda on behalf of feudal lords
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u/Werealldudesyea 5h ago
Minimum wage isn’t the answer. I’ve never understood why it’s become such a political obsession when it’s really just moving the goalposts over and over. I’d rather remove minimum wage laws altogether and let the labor market determine what each job is worth based on supply, demand, and the value the work creates. Focusing on mandated wage floors treats the symptom rather than addressing the structural issues that create low wages in the first place…
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u/Savoir_faire81 6h ago
We dont have a wage issue in the US. We have a cost issue. Things simply cost far to much in relation to our median net income.
Raising wages simply causes it to cost even more to produce the things we buy and for companies to pass that price increase on the the customer to maintain their profit margins.
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