Minimum wage hike would contribute to poverty but cost jobs, budget office says

Feb 09, 2021 Travel News

Minimum wage hike would contribute to poverty but cost jobs, budget office says

WASHINGTON – Raising the federal minimum wage to $ 15 an hour – a proposal included in the relief package pushed by President Biden – would add $ 54 billion to the budget deficit over the next decade, concluded Monday. Congressional Budget Office.

Normally, a forecast of increasing debt could hurt the political chances of the plan. But supporters of the wage hike have seized the forecast as proof that the hotly contested proposal could survive a procedural challenge under obscure Senate rules.

Democrats are trying to add the measure to a $ 1.9 trillion pandemic relief package that is progressing through a process called budget reconciliation, which requires a simple majority rather than the 60-vote margin for overcome a filibuster. But reconciliation is reserved for matters having a significant budgetary effect.

Independent Senator Bernie Sanders from Vermont said the forecast for an increased deficit showed the measure passed the test. Raising the federal minimum wage to $ 15 “would have a direct and substantial impact on the federal budget,” he said in a statement. “This means that we can clearly increase the minimum wage to $ 15 an hour under the rules.”

Critics of the plan noted a different element of the report: its forecast that raising the minimum wage to $ 15 would wipe out 1.4 million jobs by the time the increase takes full effect.

“The Conservatives have been saying for some time that a recession is absolutely not a good time to raise the minimum wage, even if it is being phased in,” said Brian Riedl, senior researcher at the Manhattan Institute. “The economy is just too fragile.”

He also took issue with Mr Sanders’ argument that the study increased the odds that a pay rise could survive Senate rules. The study found that the measure would affect private sector wages much more than it would increase the deficit – $ 333 billion compared to $ 54 billion – showing that its effect on the deficit was incidental, Mr Riedl said. .

“I doubt the parliamentarian will determine that this is primarily a budgetary reform rather than an economic reform with a secondary budgetary effect,” he said.

The rules state that budgetary effects cannot be “merely incidental” but do not define the term. While Mr Sanders called a substantial $ 54 billion, Mr Riedl said it was about half of 1% of the 10-year projected deficit.

Congress last passed a minimum wage hike in 2007. The current federal minimum, $ 7.25 an hour, is about 29 percent below its 1968 high when adjusted for l inflation, according to the Left Economic Policy Institute. David Cooper, an economic analyst at the institute, said 29 states and the District of Columbia had higher minimums, and seven states plus the District of Columbia were phasing in the $ 15 an hour threshold.

Progressives see wage increases as a central weapon in the fight against poverty and inequality, while conservatives often warn that it will cut jobs.

The report basically said that both sides were right. He revealed that a minimum wage of $ 15 would raise 27 million people and lift 900,000 people above the poverty line, but it would also cost 1.4 million jobs.

Mr. Cooper challenged the job forecasts, arguing that they were not in line with recent studies that showed minimum wage increases had little or no effect on employment. “CBO seems to be going in the opposite direction,” he says.

Progressives like Sanders have argued that an increase in the minimum wage would reduce federal spending because fewer people would need safety net programs like food stamps or Medicaid. But the budget office warned those savings would be more than offset by the higher costs of providing services such as medical care, with employers raising the wages of their workers – a finding Mr Sanders continued to dismiss. citing other studies.

Overall, the report said the changes would benefit labor rather than capital.

“They assume that there is income transferred from workers at the top of the income distribution to workers at the bottom,” Cooper said. “Therefore, they implicitly say that the minimum wage is a tool to fight inequalities. This is probably the most explicit they have ever been on this point.