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Economy in Illinois improving, but recovery halting, study finds

Robert Bruno
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L. Brian Stauffer

The Illinois economy hasn't rebounded fast enough to reach pre-recessionary levels of output, wages and employment, according to a new study from Robert Bruno, a professor of labor and employment relations on the Urbana campus.

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7/9/2013 | Phil Ciciora, Business & Law Editor | 217-333-2177; pciciora@illinois.edu

CHAMPAIGN, Ill. — The economy in Illinois may have finally emerged from the depths of the Great Recession, but it hasn’t rebounded fast enough to reach pre-recessionary levels of output, wages and employment, according to a new study from a University of Illinois labor expert.

Robert Bruno, a professor of labor and employment relations on the Urbana campus, says public policy solutions such as increasing the state’s investment in childhood education, raising the minimum wage and adopting a progressive income tax ought to be considered to jumpstart the economic recovery, promote middle-class wage growth and reduce income inequality in Illinois.

“The economy is no longer in free fall, and there are signs of a return to normalcy, but it’s beginning to flatten out,” said Bruno, also the director of the Labor Education Program in Chicago. “We’re still closer to the valley than we are to the peak, so we really need to start thinking about how to stimulate the state’s economy even more.”

Bruno and study co-author Frank Manzo IV, a research associate with the Labor Education Program, formulated 11 policy solutions to accelerate the recovery, increase employment and raise the incomes of Illinois workers, including:

  • Investing in public infrastructure.
  • Expanding the state’s Earned Income Tax Credit.
  • Cracking down on wage theft.
  • Enacting a living-wage ordinance in municipalities for private companies that receive public funds.
  • Providing tax incentives for employers in high-wage industries to move their businesses to Illinois.

“Just like the rest of the country, the state of Illinois has seen growing rates of income inequality,” Bruno said. “The question becomes, how do we preserve effective demand in the market while also having a prosperous middle-class? What sort of policy provisions will help the state of Illinois do that? Well, we’ve laid out a few in our paper.”

“We wanted to take a pre-recession, post-recession snapshot of the state of working in Illinois,” Manzo said. “What we found is that there’s still a lot of slack in the labor market; in Keynesian terms, we have what’s known as ‘weak aggregate demand.’ But the state is in recovery, albeit quite slowly, which means that workers are still worse-off than before the recession. But things aren’t quite as bad as they were during the darkest days of the Great Recession.”

The policy prescriptions advocated by the researchers are a mix of short- and long-term fixes for the state.

“Given that we’ve shifted so much of employment to part-time, informal or conditional work, raising the state’s minimum wage would be of great help to lower- and middle-class workers,” Bruno said.

“If you combined a minimum wage hike with the expansion of the earned-income tax credit, that would be an immediate help to low-wage workers,” Manzo said. “Those two moves alone would lower inequality and stimulate the state economy.”

Switching to a progressive income tax would be more of a long-term fix for legislators in Springfield to tackle. It is, however, a necessary and fair step to take, the researchers say.

“Quite frankly, Illinois needs the revenue to support the infrastructure of our state,” Bruno said. “And that infrastructure isn’t just the physical infrastructure, like our roads and bridges – it’s human capital like educators, police officers, firefighters; it’s keeping our water safe and our utilities running. The extra revenue from a progressive tax would go a long way toward preserving the state’s public services that are so critical to the quality of life here in Illinois.”

The study also recommends avoiding policies that weaken the labor force and deplete real wages – specifically, right-to-work policies that the researchers say lower wages but only have a minimal impact on employment growth, and tend to reduce the number of workers in full-time high-quality jobs.

“Other states have tried this, and although it’s garnered their governors some national press, it’s really been to the detriment of those states that have tried it because it creates a culture of insecurity among workers,” Bruno said. “Those policies failed, so it’s time to try something different – namely, worker-friendly policies.”

The researchers say workers in Illinois won’t begin to realize their full economic potential until leaders in Springfield have enacted effective worker-friendly policies.

“There is so much potential in the Illinois labor market that is going to waste,” Manzo said. “We hope that this study can add to a policy debate that needs to happen in the statehouse.”

“Illinois is still a very prosperous state with a highly educated workforce,” Bruno said. “Our leaders need to be careful that they don’t undo some of the pillars that support high wages or any of the other drivers of job growth in the state. We feel that the conversation needs to be broadened about issues that are impacting how people work in this state, and the value of the labor they provide.”

Editor's notes: To contact Robert Bruno, call 630-487-0013; email bbruno@illinois.edu.

The paper, “The State of Working Illinois 2013: Labor in the Land of Lincoln,” is available online.

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