A report released Monday by Congress’ chief scorekeeper found that a Democratic plan to raise the federal minimum wage would benefit millions of workers, just not the unlucky millions whose jobs would be eliminated.
The Congressional Budget Office concluded that raising the $7.25 hourly minimum wage to $15 by the end of 2024 would have a mixed impact on the workforce, increasing the average weekly pay of an estimated 17 million — and potentially 27 million — while throwing as many as 3.7 million out of work.
Raising the federal floor as proposed in the Raise the Wage Act, on which the House is expected to vote this month, would also reduce output and business income — a cost that would be passed on to consumers in the form of higher prices — for a cumulative $9 billion hit to median family income.
“On the basis of those effects and CBO’s estimate of the median effect on employment, the $15 option would reduce total real (inflation-adjusted) family income in 2025 by $9 billion, or 0.1 percent,” said the report.
While real income for families living above the poverty line would decrease by $16 billion, or 0.1%, about 1.3 million people would be pulled out of poverty, the report found.
House Minority Leader Kevin McCarthy, California Republican, said the report reaffirmed that a federal minimum raise would kill jobs. He said the losses would be “nearly equivalent to eliminating all jobs added to the economy since 2017,” but House Democrats said the “benefits far outweigh the costs.”
Democrats emphasized the other side of the trade-offs the report said.
“The CBO’s report leaves no doubt that the Raise the Wage Act will be good for workers and their families,” said the bill’s sponsor, Rep. Robert C. “Bobby” Scott, Virginia Democrat and chairman of the House Education and Labor Committee.
The legislation, which would increase the $7.25 per hour federal minimum wage in six steps to $15 by 2024, is expected to pass the Democrat-led House but not the Republican-controlled Senate.
Heidi Shierholz, senior economist for the Economic Policy Institute, which supports the increase, said the report showed that “as a group, low-wage workers would be unambiguously better off.”
“The report finds that a $15 minimum wage would increase the wages of millions of low wage workers, increase the average incomes of low and lower-middle-income families, reduce poverty, shift money from corporate profits to the wages of low-wage workers, and reduce inequality,” she said in a statement.
Disagreeing was Samantha Summers, a spokeswoman for the Employment Policies Institute, who said the findings back up other reports showing that minimum wage increases wind up eliminating jobs for workers at the bottom rung of the economic ladder.
“If House Democrats were uneasy about voting on $15 before this week, the CBO report should have them terrified,” Ms. Summers said in a statement. “The CBO provides further evidence of what countless studies have also shown: Raising the federal minimum wage will only hurt those it intends to help, wiping out thousands of starter job opportunities and shuttering the businesses that provide them.”
Supporters of the Raise the Wage Act argue that after 10 years with no raise, a minimum wage increase is long overdue, even though 31 states and the District of Columbia have instituted wage rates above the federal minimum, as have some major cities.
In San Francisco and Seattle, such hikes have led to a rash of restaurant closings. A 2018 Harvard Business School study found that restaurants with lower ratings “are disproportionately driven out of business by increases to the minimum wage.”
“Our point estimates suggest that a one dollar increase in the minimum wage leads to a 14 percent increase in the likelihood of exit for a 3.5-star restaurant (which is the median rating on Yelp), but has no discernible impact for a 5-star restaurant (on a 1 to 5 star scale),” said the paper.
Despite such research, raising the minimum wage has become a rallying cry for Democratic candidates, including the presidential primary contenders, prodded by the union-led Fight for $15 campaign.
“Dems campaigned on a promise to lift wages, and I look forward to bringing the #RaisetheWage Act to the Floor next week to honor that promise,” tweeted House Majority Leader Steny H. Hoyer, Maryland Democrat.
Not convinced was Rep. Steve Womack of Arkansas, the ranking Republican on the House Budget Committee, who said the proposed 107% increase would “hurt millions of families.”
“With a strong job market, we are seeing historically low unemployment and historically high wage growth,” Mr. Womack said. “I urge House Democrats not to advance a proposal that would unravel that progress and hurt millions of families in the process.”
Alfredo Ortiz, president and CEO of the Job Creators Network, said Congress instead should push initiatives designed to help fill the estimated 7 million vacancies in skilled positions earning $50,000 per year and above.
“Equipping America’s labor force with the required skills to take on these positions will help boost wages more than a government mandate ever could,” said the network.
• Valerie Richardson can be reached at vrichardson@washingtontimes.com.
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