An activist is wearing a “Fight for $ 15” T-shirt during a press conference prior to a vote on the Salary Increase Act on July 18, 2019 at the U.S. Capitol in Washington, DC.
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Raising the federal minimum wage to $ 15 an hour, as proposed by President Joe Biden, would cost 1.4 million jobs over the next four years, while raising poverty to 900,000 people, according to a report of the Congressional Budget Office Monday.
The impact on employment records is slightly higher than the estimated 1.3 million employment of a 2019 CBO report, an agency that provides budget analysis to Congress.
The number has been discussed by employment advocates who cite the benefits of the rise and say companies will be able to bear the costs.
Biden has acknowledged that the plan to phase out the new federal wage floor is unlikely to reach the $ 1.9 trillion spending plan he is pushing in Congress, although he remains committed to the increase.
The OBC report estimates that the reduction in employment would occur in 2025 and would come when employers cut payrolls to offset rising costs.
Along with the reduction in employment, the federal budget deficit would increase by $ 54 billion over the next 10 years, a rather insignificant level given that the 2020 fiscal shortfall amounted to more than $ 3 trillion.
The compensation of all workers would increase by $ 333 billion net, “a higher labor cost for companies considerably greater than the net effect on the budget deficit during this period,” the CBO report said.
According to the 2019 estimate, the agency said total family income would decrease slightly on the network.
“Higher wages would increase the cost to employers of producing goods and services,” the report states.
“Entrepreneurs would pass on some of these higher costs in the form of higher prices, and these higher prices, in turn, would lead consumers to buy fewer goods and services,” the report found. “As a result, employers would produce fewer goods and services and, as a result, would tend to reduce their employment to all levels of wages.”
There is considerable disagreement over the negative impacts of the minimum wage increase, which has remained at $ 7.25 since 2009.
“Many studies have found that higher minimum wages reduce poverty and a census study found that wage gains for affected workers continue to grow in the years following the minimum wage increase,” according to a Goldman Sachs note .
The firm added that most studies “find only modestly negative effects of increases in the minimum wage on the employment of low-wage workers.”
Walking for the minimum wage would lead to an increase in spending on Medicaid for those who lost their jobs due to higher wages, while Social Security spending would also increase due to higher wages.
In contrast, the OBC sees less spending on food stamps and child nutrition programs due to the increase in low-income people.
However, those at the bottom would also feel some impact.
The report predicts that of the 1.4 million workers displaced by higher wages, half will fall entirely from labor in 2025.
“Young, less educated people would account for a disproportionate share of these job cuts,” the report states.
Proponents of employment have cited multiple benefits to raising the minimum wage, ranging from raising the standard of living of lower-income people to providing health benefits.
Raising minimum wage levels “would disproportionately increase household incomes at the end of income distribution and significantly reduce the number of families in poverty,” the Institute for Economic Policy said in a recent paper.
Goldman estimated that the chances of him passing a $ 15 minimum wage were “low” with the most likely $ 10-11 scenario with a gradual gradual entry.