$15 minimum wage would boost pay for millions but would cost 1.4 million jobs, report says
minimum wage to $15 per hour.
The report, released Monday by the nonpartisan Congressional Budget Office, concluded that boosting the minimum wage to $15 per hour would raise income for millions of Americans and lift 900,000 people out of poverty.
But by 2025, when the hourly rate would hit $15 under a proposal before Congress, some 1.4 million fewer Americans would be working, the report concludes.
That is because higher wages would increase the cost of producing goods and services and, in response, many employers would reduce their workforce or hire fewer employees, the report said.
The report is likely to further fuel the debate over whether the minimum wage should be raised as part of a package that President Joe Biden is asking Congress to approve to help Americans and businesses recover from the economic fallout of the coronavirus pandemic.
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Supporters of a $15 minimum wage argued the report strengthens the case for raising the hourly pay rate, which currently stands at $7.25 and hasn’t been raised since 2009.
“This nonpartisan report shows that increasing the minimum wage will act as a direct and targeted stimulus for struggling workers and their families,” said Rep. Bobby Scott said, D-Va., chairman of the House Education and Labor Committee.
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In its study, the Congressional Budget Office estimated that as many as 27 million Americans would see their pay increase if the minimum wage is raised to $15 an hour. Cumulative pay for those workers would jump by as much as $509 billion over the next 10 years, the report said.
But the pay increase also would mean increased labor costs for companies, the report said. Employers would pass some of those increased costs onto consumers in the form of higher prices, which could mean a decline in sales and services, the study said.
In the end, many companies will reduce their workforce or hire less, resulting in 1.4 million fewer jobs, the report said. Young, less educated people would account for a disproportionate share of the job reductions, the report concluded.
“The weight of the evidence finds a small to no employment effect,” she told reporters on a conference call.
Michael Reich, a labor economist at the University of California, Berkeley, told reporters a minimum wage increase would have a small effect only on restaurant prices and it would not cause profits to fall.
How a raise could affect some government services
CBO also found the minimum wage measure would increase federal revenue because low-paid workers would earn more and pay more taxes but that would be more than offset by higher government costs. For example, federal spending on Medicaid would rise because workers providing health care services would earn more and people who lose their jobs because of the minimum wage hike would become eligible for Medicaid.
Social Security outlays would increase because a higher-paid workforce would receive more benefits on average. And people who lose their jobs would file for Social Security earlier than otherwise.
Other programs would become less costly, CBO says. Spending on food stamps and child nutrition programs would decline as a higher minimum wage reduces the number of low-income households receiving benefits and the average amount they receive.
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