Illinois Economic Policy Institute

The Illinois Economic Policy Institute is a new nonprofit organization which supports research and provides timely, candid, and dynamic analysis on major subjects affecting the economies of Illinois and the Midwest, specializing in the construction industry. The Illinois Economic Policy Institute uses advanced statistics, reliable surveying techniques, and the latest forecasting models to evaluate and generate public policies that empower individuals, policymakers, and lawmakers to make a positive impact.

Latest: The History of Economic Inequality in Illinois

Economic inequality in Illinois has increased to levels not seen in decades, according to a March 2016 report by the Illinois Economic Policy Institute. The report is the first ever historical analysis of wealth inequality, income inequality, and the labor-capital divide in Illinois. The report finds that the Top 1 Percent of homes in Illinois were 2.2 times as valuable as the median home in 1960 but were at least 6.7 times as valuable by 2014. Similarly, the Top 1 Percent of workers took home 3.4 times as much in annual income as the median worker in 1960. Inequality swelled by 2014, with the Top 1 Percent now earning at least 14.3 times as much as the median worker. This decline in employee compensation can be attributed almost entirely to the rise of capital income: Since 1980, Illinois has experienced a 7 percent redistribution of wealth from labor to capital. Although the state cannot completely counter national trends, the report outlines ten possible steps that can be taken locally to fight back. Facilitating union organizing, improving the quality of public infrastructure, increasing investment in public education– especially early childhood education and higher education, supporting worker training programs, raising the minimum wage, implementing a progressive income tax, expanding the earned income tax credit, cracking down on employee misclassification, relaxing zoning restrictions, and ending residential segregation are all policy solutions that Illinois could enact to generate broad-based prosperity for all.

Study: State Prevailing Wage Laws Create 400,000 Jobs

In February 2016, the Illinois Economic Policy Institute released a first-of-its-kind national study on the economic, social, and fiscal impacts of state prevailing wage laws. The report, conducted with researchers from Colorado State University– Pueblo and Smart Cities Prevail, finds that states without prevailing wage standards spend hundreds of millions more on food stamps and other government assistance programs for blue-collar construction workers, have smaller overall economic output, have higher income inequality, and collect billions less in tax revenues. If the states with prevailing wage were to repeal their laws, the nationwide impact would be a loss of 400,000 jobs, a $65 billion contraction in national GDP, and an $8 billion loss in tax revenue. The report also examines the existing body of research on both sides of the issue, concluding that 75 percent of recent peer-reviewed studies find that construction costs are not affected by prevailing wage standards. Prevailing wage policies are the best bet for taxpayers, workers, businesses, and the economy as a whole.

The Budget Crisis: Revenue Solutions for Illinois

Contrary to rhetoric from some commentators and politicians, tax collections as a share of household income are often relatively lower in Illinois than in neighboring states. In Illinois, educational achievement is high, household incomes are high, and home values are high. State taxes, when put into context, are actually not “too high” in Illinois compared to neighboring states. The key components of Wisconsin’s tax code, if applied to Illinois, would raise $8.3 billion in additional state revenues. The comparable revenue increases are $4.6 billion with Indiana’s rates and $7.3 billion with taxes similar to Iowa. Although only some of these changes may be enacted in Illinois, they could all be considered as options. The financial condition of Illinois can be improved– in whole or in part– by looking toward neighboring states.

Commentary: A $10 Billion Revenue Loss

Poor roads are costing Illinois billions of dollars in extra vehicle repairs, traffic congestion, and accidents. The main reason that the state’s transportation infrastructure is deteriorating is that revenues have not kept pace with costs. The state’s Motor Fuel Tax has been 19 cents per gallon of gasoline since 1993. Over the past two decades, the average price of goods and services has gone up by over 60 percent. Costs have increased for the materials used to build new roads, but Motor Fuel Tax revenue has stayed the same. In fact, a new ILEPI study finds that the state would have generated over $10 billion in additional transportation revenue since 1993 if it had adjusted Motor Fuel Taxes for inflation every year. By passing an inflationary adjustment and then pegging the Motor Fuel Tax to the Consumer Price Index, Illinois would restore funding to sustainable levels last seen in the 1990s. The result would be billions of extra dollars to fill potholes and construct newer, safer roads and bridges. The people of Illinois deserve the highest-quality infrastructure.

ICYMI: A Flowing Economy

Clean water infrastructure investment is a win-win-win for Illinois. Clean water infrastructure projects are a win for the workers directly employed by the investments. They also improve environmental quality and help businesses run more efficiently. Moreover, the effects of a better environment with more jobs ripple into other sectors of the economy. For every $1 billion invested in clean water infrastructure in the Chicago area, approximately 11,200 total jobs are saved or created on average. Nowhere are the economic and employment benefits of clean water more apparent than in the Chicago area. In 2014, investments by the Metropolitan Water Reclamation District of Greater Chicago and the City of Chicago Department of Water Management saved or created 19,500 total jobs and boosted the regional economy by nearly $2 billion. Despite the major progress that has been made over the past few decades, Illinois is still under-investing in clean water projects. Continued clean water infrastructure investments would enhance economic activity and promote a “high road” economy with good jobs.

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