Economy

CBO: Higher Min Wage Will Cost Jobs But Reduce Poverty

SK Ashby
Written by SK Ashby

The Democratic proposal to increase the federal minimum wage for the first time since 2009 will substantially reduce poverty and increase incomes for many people, but it could come at a cost according to the Congressional Budget Office (CBO).

The CBO estimates that raising the minimum wage to $15 could cost over a million jobs by 2025, but the benefits of doing so would be far greater than the loss alone.

On one hand, the CBO estimated that raising the minimum wage to $15 an hour would cost 1.4 million jobs by 2025 and increase the deficit by $54 billion over ten years.

But it also estimated the policy change would lift 900,000 people out of poverty and raise income for 17 million people — about one in ten workers.

The net pay going to the country’s workers would grow substantially, by $333 billion, as the increase in pay for workers would more than double the amount subtracted by the workers who lose their job, according to the estimate.

I'm personally skeptical that we could actually lose this many jobs because of it, but I'm not qualified to sit here and say the CBO is wrong.

What I can say is this doesn't feel like as big of a deal as it may have in the past. Nearly a million people have filed new claims for unemployment every month for the past year. Losing that many jobs over four years does not hit me with as much gravity in this new reality we all live in.

Even if the CBO's projections are correct, the benefits would outweigh the costs and the loss of jobs could be made up with other progressive policies and spending programs.

Unemployment programs that were expanded for the coronavirus pandemic should have those changes kept in place permanently. Everyone who has a job should be paid more than a poverty wage and those between jobs should be supported. And I don't think these are especially radical proposals or positions in the wake of the coronavirus pandemic. The old normal is gone.

We'll have to pay for all of this at some point in the future, but that's another matter.