In a report released Monday, the Congressional Budget Office said that hiking the minimum wage to $15 might reduce poverty, but at the cost of 1.4 million jobs and by adding billions to the federal deficit.
President Joe Biden and Sen. Bernie Sanders (I-VT) have both pledged to back legislation raising the federal minimum wage to $15 — what both the president and the socialist Senator call a “living wage.” Initially, both Biden and Sanders wanted to include the minimum wage hike in an upcoming COVID-19 economic relief package, but with Democrats intent on passing that bill through “reconciliation,” it may have to be offered separately.
The federal minimum wage, which sets the standard across the states, has been at $7.25 since 2009. The Democrats’ plan would see the wage increase incrementally over the next several years, starting with a hike to $9.50 per hour in June and hitting $15 by 2025.
The plan, CNN notes, would help some people, increasing “worker pay by $333 billion, giving a boost to some 17 million workers whose wages would otherwise be below $15, as well as many of the 10 million workers whose wages would otherwise be slightly above that level.”
But that bump would come at a high cost, namely millions of jobs.
The jump would “cut employment by 1.4 million workers and increase the federal deficit by $54 billion over a decade,” the outlet notes. And while federal spending on things like supplemental food aid programs might decrease, “spending on Medicaid and unemployment benefits would increase because of higher enrollment by those who lose their jobs.” Prices on goods and services would also rise, The Wall Street Journal adds.
“Higher wages would increase the cost of producing goods and services, and businesses would pass some of those increased costs on to consumers in the form of higher prices, resulting in reduced demand, the CBO said,” per the WSJ. “From 2021 to 2031, the plan would increase payments to workers by a net $333 billion, after accounting for wage increases and job losses, the study found. That would allow low-income workers to spend more but would increase labor costs for businesses and raise prices, especially at restaurants. The loss of jobs would cause a modest negative overall impact on economic growth.”
That’s a difficult outlook to contend with while the nation is still in the middle of the coronavirus pandemic. The virus and associated lockdowns meant to keep the spread of COVID-19 manageable for health care workers have taken a major toll on the economy.
Last week, The Daily Wire reported that the Biden administration is considering abandoning the call for a $15 minimum wage — at least until after the coronavirus relief package passes Congress — because it dramatically complicates negotiations around the COVID-19 relief bill.
If Democrats decide to pursue Republican approval on the bill, it’s unlikely many members of the GOP will sign on to a measure that includes such a massive wage hike. If Democrats decide to pursue “reconciliation” — a parliamentary procedure that allows the Democrats to push through a “budget-related” bill with just a simple majority — the $15 minimum wage, which is not considered a “budget” issue, would act as a poison pill, killing the measure before it ever makes it to the floor.
Sen. Sanders, however, remains convinced there is some way to force the $15 minimum wage through using reconciliation.
“I can tell you as chairman of the [Senate Budget Committee], we have a room full of lawyers working as hard as we can to make the case to the parliamentarian that, in fact, raising the minimum wage will have significant budget implications and, in fact, should be consistent with reconciliation rules,” he told CNN on Sunday.