Raising the federal minimum wage to $15 an hour would kill 1.4 million jobs, the Congressional Budget Office said in a new analysis Monday that severely complicates President Biden’s demand for a wage hike in any new coronavirus relief bill.
CBO said job losses would grow each year from implementation, and by 2025 there would be 1.4 million fewer people holding employment than there would be without the federal action. Half of those will have dropped out of the labor force altogether, the analysts said.
“Young, less educated people would account for a disproportionate share of those reductions in employment,” CBO said.
But the flip side is that 900,000 fewer people would be living in poverty, CBO said.
The analysis said 17 million people who currently are anticipated to be working for less than $15 in 2025 would see a raise, and another 10 million with pay just above the $15 level would also be affected.
Left-leaning economists cheered that news, saying those low-wage workers have earned better pay.
“In short, given which parts of the workforce have economically suffered the most from the pandemic, it seems more than appropriate to include a minimum wage increase in any relief and rescue package,” wrote Josh Bivens and other analysts at the Economic Policy Institute.
EPI also doubted the CBO job loss projections, calling them “just wrong and inappropriately inflated relative to what cutting-edge economics literature would indicate.”
CBO was analyzing a bill sponsored by Sen. Bernard Sanders, Vermont independent, who serves as Democrats’ chair of the Senate Budget Committee and who is working to try to insert the $15 standard into the coronavirus bill he’s now working on.
His legislation calls for a phase-in of the higher wage rate, reaching the $15 level by 2025, and then automatically adjust it higher in future years, based on inflation.
The plan, in addition to hurting jobs, would also sock taxpayers with $54 billion in new deficits over the next decade, since the federal government would have to pay more for goods and services, particularly in health care. That would outpace savings from welfare programs that people would no longer qualify for, CBO said.
The analysis is in line with CBO’s previous work, which has found that a small increase in the federal minimum wage, currently set at $7.25 an hour, would not be painful, but a large increase would sap jobs.
Many states have a higher wage, and the District of Columbia set its minimum wage at $15.
The Sanders bill would peg the federal wage at $9.50 on June 1, and raise it each June thereafter. In 2022 it would be $11, in 2023 it would be $12.50, and 2024 it would be $14, reaching $15 in 2025.
CBO’s analysis underscored the depths of the federal government’s reach into America’s economy.
Programs such as Medicare, Medicaid and Obamacare dominate health spending in the U.S., and hiking the minimum wage would increase costs to the programs because it would mean having to pay more for some health services.
Social Security spending would increase about $15 billion over a decade because inflation would increase, hiking the average benefit check, CBO said.
And the analysts said governments would also have to pay about $31 billion more for unemployment benefits “because more workers would be unemployed.”
But there would be fewer net people on programs like food stamps, which would cut about $10 billion in spending from those programs over a decade.
Fewer people would also be claiming some tax credits for the working poor, saving billions there, too.
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