CBO projects $15 minimum wage could raise pay but leave millions jobless

Dive Brief:

  • Increasing the federal minimum wage to $15 an hour by Jan. 1, 2025 could raise the wages of some 27 million U.S. workers, but could also leave a median estimate of 1.3 million workers out of a job who otherwise would be employed, according to a study[1] by the Congressional Budget Office (CBO) released Monday.
  • The CBO’s study specifically examined a plan for a minimum wage increase that would be implemented in six annual increments starting Jan. 1, 2020, and that would be tied to median hourly wages after reaching $15 an hour in 2025. Researchers also concluded that aside from the median estimate of 1.3 million workers, there would be a “two-thirds chance” under such a plan that the change in employment would be between zero and a net reduction of 3.7 million workers. Wage gains under a $15 federal hourly minimum would be somewhat offset by higher joblessness rates; such an increase would also reduce business income and raise prices on consumers, the CBO said. For families living below the federal poverty line, such a plan would give them 5.3% increase in real income, moving an estimated 1.3 million people above the poverty line.
  • Researchers noted two reasons why the outcomes of the study are uncertain, the first being that wage growth under current laws is uncertain, CBO said, and could either minimize or exacerbate the impact of minimum wage increases. The second: there is “considerable uncertainty” over how responsive employment is to such increases.

Dive Insight:

Advocates on both sides of the issue have taken the outcomes of the CBO study to argue[2] for or against increasing the federal minimum wage, but as the agency itself stated, there are some uncertainties surrounding both the study itself as well as the impact of minimum wage increases on employment for observers to consider.

Other research on the minimum wage has yielded mixed results. A study released in June by researchers at the University of California, Berkley found that raising minimum wages would not decrease[3] employment or hours workers in the areas studied, and that increases would instead reduce poverty rates among households and children. A 2018 study showed generally that jobs that pay below a new, higher minimum wage are eliminated[4], while those that pay above that higher rate are not.

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