If we go by the first two-and-a-half weeks of the Biden presidency, it seems as though killing jobs is a central focus of the new administration.
The Congressional Budget Office (CBO) released a cost assessment of the “Budgetary Effects of the Raise the Wage Act of 2021” on Monday, and the analysis wasn’t very flattering to the proposal.
The CBO noted three major takeaways in their “Summary” of their analysis of the proposal:
- The cumulative budget deficit over the 2021–2031 period would increase by $54 billion. Increases in annual deficits would be smaller before 2025, as the minimum-wage increases were being phased in, than in later years.
- Higher prices for goods and services—stemming from the higher wages of workers paid at or near the minimum wage, such as those providing long-term health care—would contribute to increases in federal spending.
- Changes in employment and in the distribution of income would increase spending for some programs (such as unemployment compensation), reduce spending for others (such as nutrition programs), and boost federal revenues (on net).
But perhaps the most telling statistic in the CBO’s analysis comes in when talking about the proposed minimum wage hike would affect employment.
- Employment would be reduced by 1.4 million workers, or 0.9 percent, according to CBO’s average estimate; and
- The number of people in poverty would be reduced by 0.9 million.
One question comes to mind when taking in those two points; How does an economy that loses 1.4 million jobs also reduce the number of people in poverty by 900,000?
A possible answer to the above question is that small businesses would likely see the brunt of the job loss while giant corporations install the $15 minimum wage. The corporations, who typically pay people the least amount they’re legally allowed, will bring the remaining workers out of poverty by instituting the new minimum wage pay.
But if the prices for “goods and services” increase, along with the minimum wage, then wouldn’t people be in the same boat they’re in now if they’re paying the same price, relatively, that they were when the minimum wage was lower?