· From 2021 to 2031, the cumulative pay of affected people would increase, on net, by $333 billion—an increased labor cost for firms considerably larger than the net effect on the budget deficit during that period.
· That net increase would result from higher pay ($509 billion) for people who were employed at higher hourly wages under the bill, offset by lower pay ($175 billion) because of reduced employment under the bill.
In an average week in 2025, the year when the minimum wage would reach $15 per hour, 17 million workers whose wages would otherwise be below $15 per hour would be directly affected, and many of the 10 million workers whose wages would otherwise be slightly above that wage rate would also be affected.
The CBO says one way that raising the minimum wage would add to the deficit is because health care workers would make more money, and therefore drive up the cost of health care.
The Raise the Wage Act of 2021 would affect spending for the major federal health care programs. Some of the effects would involve workers employed in the home health care and nursing care industries; CBO projects that if current laws did not change, there would be roughly 3 million such workers by 2025, many of whom would earn less than $15 per hour. Federal programs, such as Medicaid and Medicare, pay for much of the care supplied by those industries. The effect of increases in the prices of health care stemming from a higher minimum wage is a key factor contributing to an increase in spending for those programs. The effect of changes in the distribution of income is another key factor. Those changes would put downward pressure on spending for Medicaid and increase spending for marketplace subsidies.
God forbid we pay health care workers more! And if we didn’t have a health care system that was so market-based and profit-based, maybe neither the low wages nor lack of profit would be happening in the first place, now would it?
It's a similar “OH NO, NOT THAT!” when it comes to the CBO’s projection that a higher minimum wage would cause an increase in Social Security spending.
Spending for Social Security would rise with a higher minimum wage, mainly because of increases in average benefits. Average benefits would increase in part because initial benefits are indexed to economywide average wages, which would be boosted by a higher minimum wage. Average benefits would also increase because raising the minimum wage would increase inflation, in CBO’s assessment, which would in turn boost annual cost-of-living increases in Social Security benefits.
But you know what kind of spending would go down? SNAP and the Earned Income Tax Credit, because more people would have more money and not be in poverty!
CBO estimated the amounts by which labor costs for firms would change because of wages paid to people directly or potentially affected by an increase in the minimum wage—that is, people who would otherwise have been paid hourly wages that were less than the proposed new minimums or only slightly above them. Specifically, from 2021 to 2031, cumulative pay would increase by $509 billion for people who were employed at higher hourly wages under the bill. Pay would decline by $175 billion because employment would be reduced in that period under the bill. Therefore, the cumulative pay of directly and potentially affected workers would increase, on net, by $333 billion.
CBO also estimated the number of affected workers who would experience those changes in pay. If the Raise the Wage Act of 2021 is not enacted, 17 million workers (or 10 percent of the labor force as it is projected under current law) will have wages below the minimums proposed by the bill, CBO estimates, during an average week in 2025. That is therefore the number of workers who would be directly affected by the bill. Also, 10 million workers during that average week will have wages that are only slightly higher than the proposed minimums; that is the number who would be potentially affected. If the bill was enacted and the minimum wage rose, wages for many of those workers would increase as employers sought to retain some of the differences in pay that had previously existed among those workers.
So CBO says 27 million Americans will get a pay raise if we raise the minimum wage to $15 an hour. But what about all those GOP talking points about how many might lose jobs if we raise the wage?
In the 2019 report, CBO estimated that employment would fall by 1.3 million workers in 2025; in this report, the estimated reduction is 1.4 million workers. The most important analytical change that led to that difference was CBO’s use of the mean rather than the median in determining its central estimates. The distribution of possible employment effects is asymmetric, and the mean is greater than the median. If CBO had used the median values of key inputs, as it did in the 2019 report, its central estimate of the employment effect in 2025 would have been a reduction of 1.1 million workers—a smaller amount than in the 2019 report.
The estimated number of people whose annual income would rise above the federal poverty thresholds in 2025 is smaller in the current report (0.9 million) than it was in the 2019 report (1.3 million). That difference stems from the changes in CBO’s baseline projections, from the changes in the policies’ timelines, and from the use of mean outcomes rather than outcomes generated by the median values of key inputs.
This may sound cold, but to me that is a trade worth making, and we can help the extra amount of unemployed by reducing barriers to benefits and having a stronger safety net for those who lose out.
However, because the Senate parliamentarian refused to follow along with the CBO's analysis that shows how raising the minimum wage would have a budgetary effect, it's now a lot harder to have that be a part of the stimulus package. And that's because of idiotic Senate rules that say bills that are not part of reconciling the budget (as the stimulus is intended to do), can be blocked by 41 Senators.
Now, I think VP Harris or other Dems should ignore what the parliamentarian says and make the $15 minimum wage be part of the stimulus bill, but the bigger problem seems to be that some Dem Senators aren't keen on having a $15 minimum wage be part of the stimulus. So what happens from here?
To me, here is the best strategy for Democrats on the minimum wage.
1. Take it out of the stimulus bill, as it is more important to get the checks out and unemployment benefits extended. If those items are held up because a few misguided Senators don't want to vote for a $15 min wage along with the rest of this, then get rid of the minimum wage and get the stimulus into law.
2. Propose the $15 minimum wage as a standalone measure, and then dare Republicans and the holdout Dems to vote against it. I bet it'll be a lot harder for them to do, or at the very least, allows for a good compromise of $12-$14 with a tipped wage that nears $7.25. That would be a significant change that Americans would feel, and show that Dems are delivering on moves to level our slanted economic field.
Just because I don't think it's tactically correct to Fight for $15 as part of the stimulus, that doesn't mean you give up on it because it is out of the stimulus. You fight for it in the next few months, and you might be more likely to get it, or at least get a whole lot closer to it.
Voters care about action, laws and changes. You give them that, and you have a lot better chance of winning in 2022 than trying to gamble a $15 minimum wage as part of the stimulus bill and possibly falling short in many areas.
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