President Biden’s proposal to raise the minimum wage to $15 per hour would cost jobs and raise the costs of good and services, but would lift nearly one million people out of poverty.
The wage hike would would cost 1.4 million jobs by 2025 and increase the deficit by $54 billion over ten years, the nonpartisan Congressional Budget Office said in a report released today.
In its cost assessment of Biden’s ‘Raise the Wage Act of 2021,’ the CBO also concluded a minimum wage increase would lift 900,000 Americans out of poverty.
The findings will likely inflame the debate around the proposal instead of settle things. Democrats have argued the wage hike will lift people out of poverty. Republicans have countered it would cost jobs.
Both sides will find support for their argument in the CBO assessment.
The proposed change in wage could affect as many as 27 million workers who were earning less than or slightly above $15 in 2025, the budget office predicted. The existing federal minimum wage, at $7.25 an hour, has not been changed since 2009.
However, the cost of goods and services would increase because employers would try to pass on the financial burden of higher wages to consumers, the report forecast.
‘Those higher prices, in turn, would lead consumers to purchase fewer goods and services. Employers would consequently produce fewer goods and services, and as a result, they would tend to reduce their employment of workers at all wage levels,’ the CBO predicted.
The study also estimates net pay would jump $333 billion over a decade through 2031, with the $509 billion in higher wages, more than offsetting the $175 billion in lost wages due expected job cuts.
White House press secretary Jen Psaki declined to comment on the CBO score and what it mean for Biden’s proposal, which still needs to pass Congress.
‘Well I heard about the CBO score as I was walking out here so I haven’t talked with our economic team about that specifically,’ she said at her daily press briefing.
Senate Democrats found a silver lining in the report. They argued its findings meant a minimum wage hike could be included in Biden’s $1.9 trillion COVID relief plan.
The relief plan will be passed under reconciliation, a fast-track legislative process that takes the vote thresh hold in the Senate down to a simple 51 majority.
But, because of that, the bill must have a direct impact on federal spending, revenues or the debt.
Senator Bernie Sanders, the chairman of the Senate Budget Committee who has been the driving force behind an increased minimum wage, said that CBO score meant there was an impact on federal spending.
‘What that means is that we can clearly raise the minimum wage to $15 an hour under the rules of reconciliation,’ he said.
‘The only way to increase the minimum wage to $15 an hour now is to pass it with 51 votes through budget reconciliation,’ he said.
Biden, who spent three decades in the Senate, seemed uncertain his plan for $15 an hour could be approved through reconciliation.
‘I don’t think it’s going to survive,’ he told CBS News.
The White House later said the Senate parliamentarian would make the final call.
‘There is a parliamentarian who will make decisions about what can end up in a final package,’ Psaki said at her press briefing.
Even if it’s included, it may not be passed.
Democrats need every single one of their votes and Democratic Senator Joe Manchin of West Virginia has said he’s against the wage hike.