The nonpartisan Congressional Budget Office said Monday that raising the federal minimum wage to $15 an hour, up from the current rate of $7.25 a hour, would likely cause 1.3 million people to lose their jobs.
This would erase the overall benefits of the higher wage, with family income falling by $9 billion or about 0.1%, adjusted for inflation.
The report comes as Democrats in Congress are pushing to more than double the federal minimum wage. House Democrats are expected to vote on the Raise the Wage Act, which would raise the rate to $15 by 2024, before the August recess.
The agency’s analysis found that while the poorest would benefit from the effort, most others would see losses. The increase would raise the pay of about 17 million workers currently below the $15 level and another 10 million workers slightly above it, but this would be offset by the reduction in income for families above the poverty line due to fewer jobs, higher prices, and loss in income for business owners.
“CBO estimates that families whose income would be below the poverty threshold under current law would receive an additional $8 billion in real family income in 2025 under this option. That would amount to a 5.3% increase in income, on average, for such families. That extra income would move, on net, roughly 1.3 million people out of poverty. Real income would fall by about $16 billion for families above the poverty line,” the report found.
House Education and Labor Committee Chairman Bobby Scott, D-Va., said the report showed that “the benefits vastly outweigh any costs” of raising the wage to $15, citing its estimation that 27 million would see their paychecks increase.
“If the job loss is the only thing they look at, obviously they will have concerns, but anybody who reads the whole report would be impressed,” Scott said.
Business groups countered that the report should give lawmakers pause. “The consequences will be especially brutal for small businesses, which already operate within razor-thin budget margins. House Democrats — who are expected to consider federal $15 minimum wage legislation this month — should take into account Monday’s report and pursue policies that will push wages up without hurting the economy,” said Alfredo Ortiz, president of the Job Creators Network, an ad-hoc coalition of trade groups.
The report said the job losses would happen due to employers attempting to absorb the higher labor costs by hiring less, cutting back on hours, cutting back on fringe benefits such as health insurance or pensions, cutting back on training, and turning more to contractors whose workers are not covered by federal minimum wage rules. Workers would also face higher prices for consumers products as businesses tried to pass along the costs.
Less aggressive increases to the rate would have more moderate effects, the report found. An increase to $12 a hour would raise the wages for 11 people while only causing family income to fall by $1 billion or .05% and costing about 300,000 jobs. An increase to $10 a hour, would increase wages for 3.5 million people while reducing family income by $100 million, a negligible difference.
