Feb 8, 2021 - Politics & Policy

CBO: $15 minimum wage would increase unemployment but lift 900,000 out of poverty

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Photo: Chip Somodevilla/Getty Images

An analysis by the nonpartisan Congressional Budget Office released Monday found that the $15 federal minimum wage bill proposed by Democrats would cut jobs for 1.4 million workers by 2025, but lift 900,000 people out of poverty.

Why it matters: President Biden included a proposal to increase the minimum wage from $7.25 to $15 an hour in his $1.9 trillion coronavirus relief plan, but it's facing resistance from moderate Democrats like Sen. Joe Manchin (D-W.Va.). Biden said over the weekend that he does not expect the provision to survive negotiations, but that he'll push for it in a separate bill.

  • "No one should work 40 hours a week and live below the poverty wage. And if you’re making less than $15 an hour, you’re living below the poverty wage," Biden said.

Details: The CBO report found that a $15 minimum wage phase-in by June 2025, as proposed by Democrats, would have the following effects:

  • Increase the cumulative budget deficit over the 2021–2031 period by $54 billion.
  • Drive prices higher for goods and services — "stemming from the higher wages of workers paid at or near the minimum wage."
  • Increase wages for 17 million workers who currently make under $15 an hour, as well as 10 million workers whose wages would otherwise be slightly above that wage rate.
  • The cumulative pay of affected people would "increase, on net, by $333 billion."
  • That net increase would come from "higher pay ($509 billion) for people who were employed at higher hourly wages under the bill, offset by lower pay ($175 billion) because of reduced employment under the bill," the report adds.

Context: The CBO is a nonpartisan federal agency that analyzes the effects of proposed fiscal policies.

What they're saying: Senate Budget Committee Chair Bernie Sanders wrote in response on Monday, "I find it hard to understand how the CBO concluded that raising the minimum wage would increase the deficit by $54 billion. Two years ago, CBO concluded that a $15 minimum wage would increase the deficit by less than $1 million over ten years."

  • "The good news, however, is that from a Byrd Rule perspective, the CBO has demonstrated that increasing the minimum wage would have a direct and substantial impact on the federal budget," he added.
  • "What that means is that we can clearly raise the minimum wage to $15 an hour under the rules of reconciliation."
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