In light of a $15 federal minimum wage creeping onto the growing laundry list of nearly every 2020 Democrats’ greatest political fantasies, the nonpartisan Congressional Budget Office put the proposal to a test and confirmed the most obvious consequence of the “Fight for $15”: millions of American jobs eliminated within a year.
Assuming by 2025 we haven’t hit a recession or any other major disruption to the longest bull market in American history, the CBO’s median estimate finds that a $15 hourly federal minimum wage would increase the wages of 17 to 27 million Americans at the cost of a median estimate of 1.3 million jobs, and an upper estimate of 3.7 million. As a result, they note, the reduction of business income would increase consumer prices, and the reduction of employment would decrease the nation’s overall capital. Aggregate real income for Americans over the poverty line would fall by some $16 billion.
Most tellingly, the number of Americans lifted out of poverty as a result of the proposal would be only 1.3 million, the same as the median estimate for those who will be thrown out of work altogether or never employed to jobs they would have gained otherwise. This may seem like a silver lining to supporters, but really it disproves the idea that a $15 federal minimum wage creates any net benefit. It simply reshuffles the problems plaguing our economy, on the whole creating more new problems than it solves.
On a local level, marginal minimum wage increases can appear harmless, especially when differentiating for age. Midsized businesses can absorb a small increase in variable costs, and in large metropolitan areas with inflated consumer price indices, there’s not much of a difference between paying an unskilled worker $10 versus $11 per hour. But small businesses simply can’t pay the premium. And big businesses are far more likely to automate jobs away if the government makes human labor arbitrarily expensive.
Minimum wages aren’t creating the crisis of 25% of American jobs being doomed to automation, but they’re certainly exacerbating the phenomenon at the lower end of the wage scale. You just need to go to your local McDonald’s and order from the kiosk to see this in action.
The CBO has underscored, however conservatively, the greatest problem posited by the fight for $15, but job loss is far from the proposal’s only threat. It will also cause a loss of purchasing power for the 150 million-plus workers (and newly unemployed) who will not be getting a direct raise as a result of the proposal. Someone, after all, will have to pay the higher prices passed on to consumers to pay higher wages to fry cooks and janitors. Even those who do get a raise will see their own benefit diminished by the rise in prices.
The fight for $15 is nothing more than a Band-Aid over generations of our education system’s failure to embrace vocational training and give young people the skills needed by businesses of the future.
We’d be fools to try and fight the inevitability of automation, and even greater fools to ignore our duty to think of a solution. The lack of any net benefit from the fight for $15 proves that it merely takes fish away from a few million men and redistributes them. Democrats would be wise to plan an actual proposal to teach men how to fish instead of dying on this hill of economic illiteracy.
