For both proponents and opponents of an increase to the minimum wage, Monday’s Congressional Budget Office projection was a mixed bag of outcomes.
The proposed Raise the Wage Act would increase the federal minimum wage from $7.25 an hour to $15 an hour by 2025. Also, it would continually adjust the minimum wage to reflect the cost of living.
If passed, the federal minimum wage would increase to $9.50 on June 1, $11 in June 2022, $12.50 in June 2023, $14 in June 2024 and $15 in June 2025.
The nonpartisan CBO examined what would happen if the Raise the Wage Act gets enacted in March.
In its findings, while the CBO projects that the poverty rate would decline by .9%, roughly the same percentage of workers would find themselves out of work.
Here are the highlights:
- The number of unemployed Americans would increase by a projected 1.4 million workers, or .9%.
- Conversely, the act would reduce the number of Americans in poverty by .9%.
- The cumulative budget deficit through 2033 would increase by $54 billion. Increases in annual deficits would be smaller before 2025.
- Higher prices for goods and services, stemming from the higher wages of workers paid at or near the minimum wage, would increase federal spending.
- Changes in employment and income distribution would increase spending for some programs (such as unemployment compensation), reduce spending for others (such as nutrition programs), and boost federal revenues.
The CBO projects the cumulative pay of affected people would increase, on net, by $333 billion through 2033. At the same time, those seeing higher income would cumulatively have a $509 billion increase in pay through 2033. Those with reduced employment would lose $175 billion in income.
The CBO says that increased federal spending would be partially offset by more tax revenue as fewer Americans would qualify for tax credits, such as the earned income tax credit.
The progressive wing of the Democratic Party has been pushing for an increase in the federal minimum wage. Members say that 32 million Americans would see a pay increase under the Raise the Wage Act.
But the CBO suggests that number is likely smaller. The CBO projects that by 2025, 17 million workers, whose wages would otherwise be below $15 per hour, would be directly affected.
The CBO also estimates that up to 10 million additional workers making near $15 an hour could be affected.
On Monday, the White House remained committed to increasing the minimum wage. However, it’s likely not to be among the items included in the $1.9 trillion stimulus bill Congressional Democrats are attempting to pass.
Late last week, President Joe Biden suggested the bill could become a standalone item.
"The president remains firmly committed to raising the minimum wage to $15, that is why he put it in his first legislative proposal,” White House press secretary Jen Psaki said. “And he believes an American who is working a full-time job trying to make ends meet should not be at the poverty level."
Senate Minority Leader Mitch McConnell cited the CBO’s findings on the floor of the Senate on Monday.
“But remember, this is about liberal dreams and not urgent needs,” McConnell said about Democrats wanting to include a minimum wage increase in the stimulus bill.
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