New CBO report fuels fight over $15 minimum wage

Democrats and Republicans both seized on a new report Monday from the nonpartisan Congressional Budget Office (CBO) laying out the pros and cons of raising the minimum wage to $15.

The CBO said that increasing the hourly wage from its current rate of $7.25 to $15 by 2025 could lead to the loss of 1.3 million jobs — giving Republicans their main talking point — while also lifting 1.3 million people out of poverty, a point Democrats hammered home.

Democrats also highlighted how an estimated 17 million workers would get an income boost if their Raise the Wage Act becomes law. The House is slated to vote on the measure in the coming days.

{mosads}“Democrats campaigned on a promise to lift wages, and I look forward to bringing the Raise the Wage Act to the Floor next week to make good on that promise,” House Majority Leader Steny Hoyer (D-Md.) said in a statement Monday. “Americans who work hard deserve to afford a middle-class life and deserve opportunities to get ahead and help their children get ahead.”

Republicans instead highlighted the potential job losses.

“Today’s Congressional Budget Office report reaffirms that a $15 minimum wage would kill American jobs and harm Americans struggling to make ends meet,” House Minority Leader Kevin McCarthy (R-Calif.) said in a statement. “Today, Americans enjoy a booming economy, historically low unemployment, and notable wage growth. We must not jeopardize those gains through greater government control.”

The Democratic bill, which the GOP-controlled Senate is not expected to take up if it passes the House, would increase the minimum wage to $15 by 2024, eliminate tipped minimum wages, and tie the minimum wage to inflation. It would be the first increase in the federal minimum wage in a decade.

“For most low-wage workers, earnings and family income would increase, which would lift some families out of poverty. But other low-wage workers would become jobless, and their family income would fall—in some cases, below the poverty threshold,” the CBO said in its report.

But some Democrats also have raised concerns about the bill’s effects on jobs. Last year, a group of red-state Democrats led by Rep. Terri Sewell (D-Ala.) introduced a competing version of the minimum wage bill that would allow places with lower costs of living to raise minimum wages more slowly, an effort to avoid “shocking” their economies.

{mossecondads}“I am concerned about the fact that $15 is an arbitrary number that means a lot more in certain parts of the country than it does another,” Rep. Dean Phillips (D-Minn.) told The Hill last month. Phillips won a district in 2018 that had long been held by Republicans.

Neither Sewell nor Phillips responded to requests for comment after the CBO report came out, but most supporters of the competing legislation have said they intend to vote for the Raise the Wage Act.

For other Democrats, though, the potential gains to low-income workers highlighted by the CBO were a rallying cry.

“The Congressional Budget Office’s report comes to a clear conclusion: The benefits of the Raise the Wage Act for America’s workers far outweigh any potential costs,” said Rep. Bobby Scott (D-Va.), who chairs the House Education and Labor Committee.

The CBO also said the benefits of the legislation could extend to 10 million workers who currently earn just above the minimum.

For proponents of a wage increase, the net effect of 1.3 million fewer people living in poverty is worth the trade-offs.

“At face value, the score proves $15 should be a no-brainer for Congress, with benefits far outweighing speculative job loss,” said Christine Owens, executive director of the National Employment Law Project.

The Economic Policy Institute (EPI), a left-leaning think tank, argued that the job losses in the CBO report are overstated, particularly when considering that some of them would come in the form of fewer hours, not total layoffs. That could mean an employee works fewer hours but still ends up getting paid more, they said.

“The crucial fact is that an employment decline as a result of a minimum wage increase doesn’t necessarily mean any worker is actually worse off,” EPI analyst Heidi Shierholz said.

But while the low end of CBO’s projection for job loss is zero, Republicans focused on the high end of the estimate.

Rep. Steve Womack (R-Ark.), the ranking member on the House Budget Committee, said the CBO report “shows that imposing a 107-percent increase on the minimum wage could result in up to 3.7 million lost jobs.”

House Republican Whip Steve Scalise (R-La.) said the $15 target “was picked out of thin air and is not supported by any reasonable economic analysis.”

CBO said the higher wage also would function to redistribute income. While low-wage workers would benefit, seeing an $8 billion gain to real family income, higher-income families would see real income fall by $16 billion as business income dropped and consumer prices increased.

The conservative Job Creators Network argued it would be better for Congress to focus on increasing skills in the labor force to help fill open positions.

“Instead of pursuing a $15 minimum wage that will reduce employment opportunities and real family income, lawmakers should be fighting for $50,000 careers by addressing the skills gap,” the group said.

Inconvenient for both sides, however, was CBO’s level of uncertainty surrounding the issue.

“Many studies have found little or no effect of minimum wages on employment, but many others have found substantial reductions in employment,” the report said.

Updated at 6:21 p.m.