How many workers would get raise under $15 minimum wage plan? Here’s an early estimate
Millions of workers could get a raise under a proposal to boost the minimum wage to $15 an hour, a report found.
The report, released Monday by the nonpartisan Congressional Budget Office, analyzed the impacts of the Raise the Wage Act of 2021, which was introduced in January, on workers and the economy. The act would gradually raise the federal minimum wage from $7.25 an hour to $15 an hour by 2025.
In addition to the raises for million of workers, the CBO report found the proposal to increase the federal minimum wage would lead to a significant reduction in poverty. But it could also lead to more than 1 million job cuts and increase the deficit by billions.
Wage raises and a reduction in poverty
The report estimates 17 million workers who would otherwise make less than $15 an hour would get a raise by 2025 if the policy were enacted. That’s about 10% of the current workforce.
Many of the 10 million workers who make slightly above $15 an hour would also be affected, the report says.
“If the bill was enacted and the minimum wage rose, wages for many of those workers would increase as employers sought to retain some of the differences in pay that had previously existed among those workers,” the report says.
By 2031, the report estimates the “cumulative pay” of workers who would receive the raise would increase by a net $333 billion, including a $509 billion increase for people employed at higher hourly wages and a $175 billion decrease resulting from a predicted reduction in employment.
The report also estimates that the number of Americans living below the federal poverty level would decrease by 900,000 by 2025 under the proposal.
“For families with workers earning wages at or near the federal minimum, real income would increase,” the report says. “That effect would be concentrated in the lowest quintile, or fifth, of the distribution of family income.”
Potential job cuts
The CBO estimates that raising the proposal could cost roughly 1.4 million jobs, or about 0.9% of the workforce.
“Higher wages would increase the cost to employers of producing goods and services. Employers would pass some of those increased costs on to consumers in the form of higher prices, and those higher prices, in turn, would lead consumers to purchase fewer goods and services,” the report says. “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.”
Young and “less educated” workers would likely feel the brunt of the employment reduction, the report predicts.
In 2021, the report expects most people out of a job because of the minimum wage increase would be classified as unemployed as they would still be actively looking for a job. But by 2025, it estimates half of those workers will have dropped out of the workforce.
The CBO also estimates the proposal would increase the federal deficit by $54 billion over the next decade.
But boosting the minimum wage would also increase net revenues between now and 2031, including through “higher labor earning among low-wage workers.”
“The increases in revenues would occur several years later than the increases in spending, so the deficit effect from 2021 to 2031 would be larger than the total eventual effect,” the CBO says.
Could the federal minimum wage be increased?
Increasing the minimum wage, which has been the same since 2009, has long been a topic of debate.
Opponents have warned about job losses while supporters have pointed to states and cities that have benefited from minimum wage increases, The Washington Post reports. Eight states and Washington, D.C., have already enacted a $15 per hour minimum wage.
Now, the possibility of a federal increase has been revived under President Joe Biden’s administration.
Biden initially included a minimum wage increase in his $1.9 trillion coronavirus relief proposal. But he’s previously signaled the increase may not be included in the final package due to reconciliation rules.
Democrats have moved forward with passing the relief package through reconciliation, a process that allows for “expedited consideration” of matters related to spending, taxes and debt. The process means only a simple majority, instead of 60 votes, would be needed to pass the package.
But for a policy to fall under reconciliation, it has to be “tied to the budget and impact outlaws and revenue,” CNBC reported. So, Democrats would have to argue a minimum wage increase is directly tied to the budget.
Sen. Bernie Sanders, however, recently told CNN that “we have a room full of lawyers working as hard as we can to make the case to the parliamentarian that, in fact, raising the minimum wage will have significant budget implications and, in fact, should be consistent with reconciliation rules.”
On Monday, White House Press Secretary Jen Psaki told reporters Biden is “firmly committed to raising the minimum wage to $15” and will look at additional options for doing so.
“That’s why he put it in his first legislative proposal, and he believes that any American who is working a full-time job trying to make ends meet should not be at the poverty level,” Psaki said. “And it’s important to him that the minimum wage is increased.”
This story was originally published February 8, 2021 at 2:09 PM with the headline "How many workers would get raise under $15 minimum wage plan? Here’s an early estimate."
