Raising the federal minimum wage to $15 an hour by 2025 could deliver raises for 27 million workers and lift 900,000 Americans above the poverty threshold—but the policy would cost 1.4 million Americans their jobs over the next four years, according to a study recently released by the nonpartisan Congressional Budget Office.
President Biden and many Democrats are pursuing legislation to more than double the current federal minimum wage of $7.25 an hour in phases. Republicans and some businesses and economists have warned that such an increase could cost jobs as the U.S. recovers from pandemic layoffs.
While the study finds poverty-reducing effects, its broader findings could make it difficult for proponents of an increase to rally enough votes to raise the wage.
The CBO study reaffirms a finding that a $15 minimum wage could cost the U.S. jobs, slightly increasing a job-loss estimate from a widely cited 2019 study.
The analysis showed a minimum-wage increase would cause prices to rise, the federal budget deficit to widen, and overall economic output to slightly decrease over the next decade.
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.
“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 report said. “Young, less educated people would account for a disproportionate share of those reductions in employment.”
While more than one million would lose jobs, the report said 17 million U.S. workers, or about 10 percent of the labor force, would have their pay increased. Another 10 million workers who earn slightly more than $15 an hour could also potentially see pay increases.
The study assumes a June 1 effective date for the bill, raising the federal minimum wage to $9.50 an hour. Under the plan, the wage would be increased annually until reaching $15 an hour in 2025, after which the pay floor would be adjusted based on the change to the median wage of all workers.
The federal minimum wage has not changed since 2009.
Source: The Wall Street Journal