The analysis, from the Nathalie P. Voorhees Center for Neighborhood and Community Improvement at the University of Illinois at Chicago, focused on eight major regions around the state: Carbondale, Champaign, Chicago, Peoria, Quad Cities, Rockford, Springfield and St. Louis.
It found that even when accounting for potential job losses from the wage hike -- and the possibility that low-wage earners could lose eligibility for other government assistance programs such as Medicaid -- there is likely to be a net gain for low-wage households.
Households that rent are likely to benefit the most from an increase in minimum wage, according to the study.
“I was very surprised to see how great the gains were even from just an increase to a $10 per hour minimum wage in some of these regions,” said Lauren Nolan, a co-author of the study and economic development planner at the Voorhees Center. “I think we didn’t know how housing cost burdened those folks would be. And these are folks that are, again, working full-time, sometimes even with more than one wage earner in the household.”
The analysis focused on households where at least one person earns minimum wage and where more than 30 percent of the household income is spent on housing, the federal description of “housing cost burdened.”
Nolan said while it may seem obvious that raising take home pay would ease the cost burden of rent or mortgages, policymakers generally have not focused on raising the minimum wage as a tool to promote housing affordability. Instead, the discussion often revolves around increasing the stock of affordable housing or better distributing government subsidies for housing, such as vouchers.
“It’s a both-and solution,” Nolan said. “Increasing the minimum wage will make a significant dent in this problem and go a long way for working households. But (it)... should absolutely be coupled with other affordable housing programs.”
Looking at 2014 data of households with minimum wage earners, the study estimates that one quarter of Illinois households that own, and nearly half of households that rent, are housing cost burdened. In Chicago, those numbers rise to 34 percent and 61 percent, respectively.
The analysis explores the potential impact of raising the minimum wage in Illinois to $10 per hour, $13 per hour and $15 per hour. Tor Chicago, which already has a $10 per-hour minimum wage, it examines the impact of raising that wage to $13 per hour and $15 per hour.
It found more than 170,000 Illinois households in the study would no longer be “housing cost-burdened” if the wage were increased to $15 per hour. Chicago accounts for nearly 107,000 of those.
The study also examined the larger economic impact of raising the minimum wage, including the net effect of immediate job losses in service sector industries and the secondary ripple of job gains as minimum wage workers experience stronger purchasing power.
“We ran the numbers for the state of Illinois as a whole, and for the Chicago region, and at different minimum wage levels the net job loss was actually less than one percent,” Nolan said.
She said she would also expect a pay bump might result in some minimum wage earners no longer qualifying for public benefits, such as Medicaid and food stamps. She said more analysis is needed here, but believes workers would still net out better off than they had been with the lower wages.
The study recommends Illinois enact a $10 per-hour minimum wage in the upcoming year, and that the six-county Chicago region enact a $15 per-hour minimum wage.
Illinois currently has a minimum wage of $8.25 per hour. Chicago is on track to increase its minimum wage to $13 per hour by 2019. Cook County recently passed an ordinance that would increase the suburban minimum wage to $13 per hour by 2020.