Progressives Dispute CBO Analysis That $15 Minimum Wage Will Hurt Job Numbers

The fight to increase the minimum wage continues to pose a challenge for Democrats as progressive voices dispute analysis that a $15 rate would lead to fewer jobs and a higher deficit.

The findings by the Congressional Budget Office, released on Monday, outlined possible scenarios under President Joe Biden's plan to raise the minimum wage to $15 an hour by 2025.

Biden's Raise the Wage Act of 2021 would benefit 27 million workers and lift 900,000 people out of poverty with a net increase in wages over a decade of $333 billion, the CBO said.

However, higher wages would raise prices for consumers and employers would move to automate more roles, leading to about 1.4 million fewer jobs by 2025.

Minimum wage march
A protest in Herald Square, New York calls for the minimum wage for fast food workers to be raised to $15 dollars an hour. The CBO has warned that raising the minimum wage could cost jobs. James Leynse/Getty Images

This amounts to a 0.9 percent decrease in employment. There would also be a budget deficit increase of $54 billion over the next 10 years, because of higher government costs through unemployment insurance and health care spending.

As Democrats push to include the increase in their $1.9 trillion relief bill, the report may turn off moderate lawmakers in the party.

Republicans such as Rep. Virginia Foxx of North Carolina have seized on the CBO report as evidence that a minimum wage increase would kill jobs. Rep. Michael Burgess (R-TX) tweeted: "Washington needs to be putting forward solutions that will get Americans back to work not putting them out of a job."

After the White House described the projected job losses as "overstated," however, California Rep. Ro Khanna pushed back at the federal agency, tweeting: "This CBO analysis is not by leading economists in the field."

Referring to the economist Arindrajit Dube, who disputes that a higher minimum wage hurts job numbers, Khanna added: "Consider @arindube⁩ work, recent studies showing the impact is more HS degrees required, or that wage growth & spending would create more jobs than lost. False pretense of expertise."

His tweet was shared by entrepreneur Joe Sandberg, who told his 143,000 followers: "Agree with @RoKhanna—a higher minimum wage is good for the economy, good for business, good for entrepreneurship, good for workers and long, long overdue!

"In the end, a $15 minimum wage would raise earnings of low-wage workers, reduce inequality, and have significant and direct fiscal effects."

Rep. Andy Levin, a Democrat from Michigan, shared an article about the impact a higher minimum wage might have on job numbers but added a message of support for the move.

Levin tweeted: "Congress has the opportunity not only to get folks the one-time resources needed to overcome the pandemic, but also to give 27 million Americans a forever raise and lift 1.3 million adults and kids out of poverty with a $15/hr minimum wage."

The Economic Policy Institute, a left-leaning think tank, also took aim at the CBO's projections, saying in a statement: "We believe the CBO's assumptions on the scale of job loss are just wrong." It added that the figures were "inappropriately inflated relative to what cutting-edge economics literature would indicate."

The graphic below provided by Statista shows minimum wage levels across the U.S.

U.S. minimum wage at state level
Statista

When contacted for comment, the CBO referred Newsweek to sections of its report that described how, over the past two years, it had developed the capacity to analyze "the behavioral effects for minimum-wage legislation."

Its latest analysis took into account the impact of a higher minimum wage on businesses, prices, income distribution and employment.

"The set of affected programs is broader than those included in some other analyses; for example, this report includes effects on spending for major health care programs, unemployment compensation and Social Security," it said.

Raising the federal minimum wage from $7.25 to $15 is a key ambition for progressive Democrats such as Rep. Pramila Jayapal of Washington, who helped implement a $15 minimum in Seattle in 2014.

In an interview with MSNBC, she emphasized that the plan would lift people out of poverty, despite its critics.

Jayapal said: "We want to make sure people understand we've got to get it across the finish line," adding that Democrats would "have to fight" to get the bill through the House and the Senate.

Newsweek has contacted the Congressional Progressive Caucus for comment.