(LOOTPRESS) – If President Biden’s COVID-19 relief plan is passed as is, it would include raising the minimum wage to 15 dollars an hour.
The Congressional Budget Office (CBO), a nonpartisan analysis for the US Government, released its report on raising the minimum wage. They estimate that 1.4 million jobs would be lost if the minimum wage was increased to 15 dollars an hour; however, it would lift 900,000 people out of poverty.
The last time the minimum wage was increased was back in 2009, which remains below historical levels.
If enacted at the end of March 2021, the Raise the Wage Act of 2021 (S. 53, as introduced on January 26, 2021) would raise the federal minimum wage, in annual increments, to $15 per hour by June 2025 and then adjust it to increase at the same rate as median hourly wages. In this report, the Congressional Budget Office estimates the bill’s effects on the federal budget.
- The cumulative budget deficit over the 2021–2031 period would increase by $54 billion. Increases in annual deficits would be smaller before 2025, as the minimum-wage increases were being phased in, than in later years.
- Higher prices for goods and services—stemming from the higher wages of workers paid at or near the minimum wage, such as those providing long-term health care—would contribute to increases in federal spending.
- Changes in employment and in the distribution of income would increase spending for some programs (such as unemployment compensation), reduce spending for others (such as nutrition programs), and boost federal revenues (on net).
Those estimates are consistent with CBO’s conventional approach to estimating the costs of legislation. In particular, they incorporate the assumption that nominal gross domestic product (GDP) would be unchanged. As a result, total income is roughly unchanged. Also, the deficit estimate presented above does not include increases in net outlays for interest on federal debt (as projected under current law) that would stem from the estimated effects of higher interest rates and changes in inflation under the bill. Those interest costs would add $16 billion to the deficit from 2021 to 2031.
The estimates in this report are based on CBO’s most recent economic forecast, which was released earlier this month. CBO estimated the budgetary effects using techniques that it has developed over the past two years. Those estimates are based on CBO’s estimates of the bill’s effects on the economic behavior of individuals and firms—which in this report refers to actions that change relative prices, the distribution of income, employment, and other economic factors.
Underlying the budgetary estimates are CBO’s projections of how pay would change for people directly or potentially affected by an increase in the minimum wage—that is, people who would otherwise have been paid hourly wages that were less than the proposed new minimum or slightly above it—and how changes in pay would affect the number of people employed.
You can view the complete report here: https://www.cbo.gov/system/files/2021-02/56975-Minimum-Wage.pdf