One of the goals that President Joe Biden has set is to raise the federal minimum wage to $15 an hour. Doing so would more than double it from where it currently sits at $7.25 per hour, and the thinking behind doing so is that it would help reduce nationwide poverty and provide a living wage to all Americans, regardless of the jobs they work or the career path they choose.
It’s a notable initiative that could come at just the right time, as millions of Americans struggle to make ends meet as the COVID-19 pandemic drags on. But like any initiative, it would also have consequences – and more of these effects have come into light thanks to an analysis from the non-partisan Congressional Budget Office (CBO).
The CBO outlines both the good and the bad of such a policy, should it be enacted. The good is that it would significantly increase the wages of about 17 million Americans by the year 2025. The bad? It’s likely to eliminate nearly 4 million jobs as businesses would have to adjust their structures to offset income losses. It would also likely mean that prices on certain products and services would increase.
How Much Would it Help?
According to the CBO, raising the minimum wage would have the biggest positive impact on low-income families, potentially moving more than 1.3 million out of poverty. However, for earners that are just above the poverty line, income would likely fall by around $16 billion by 2025, representative of a 0.1 percent reduction.
However, despite a cautionary analysis from the CBO, other studies suggest that raising the minimum wage would help boost the economy and economic output. One study from the University of California Labor Center expects any increase in federal minimum wage to lessen the burden on government assistance programs, which account for nearly $100 billion per year in taxpayer money.
Will it Happen?
President Biden snuck the $15 per hour minimum wage increase into his proposed COVID relief package, which will likely become a priority in the early days of his presidency. It’s also likely to become one of the more hotly contested line items as the House and Senate take up the package in the coming days and weeks. If it does happen, it will likely be something that happens gradually and not all at once, giving businesses time to adjust their models over time.
Increasing the minimum wage from the $7.25 mark that it’s been at for many years has received attention for a while now, and though the federal government has failed to act on it, several states have. Florida voters approved a path to increasing the minimum wage to $15 an hour by 2026 last November, and a handful of other states are also on a similar path. We tend to prefer letting the individual states decide on this manner rather than the federal government making decisions for them. But with Democratic control of the House and Senate, this may be an opportune time where something like this could be accomplished on the national level.