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$15 minimum wage would boost pay for 17 million but 1.3 million would lose their jobs, CBO says

Key Points
  • Raising the federal minimum wage to $15 per hour by 2025 could boost pay for 17 million people, according to  Congressional Budget Office estimates. 
  • It could also cause 1.3 million people to lose jobs. 
  • House Democrats could vote on a plan to hike the federal minimum wage to $15 per hour later this month.  
People gather together to ask the McDonald’s corporation to raise workers wages to a $15 minimum wage as well as demanding the right to a union on May 23, 2019 in Fort Lauderdale, Florida.
Joe Raedle | Getty Images News | Getty Images

Hiking the U.S. minimum wage to $15 per hour would give millions of Americans a raise but put a smaller share of people out of work, according to projections released Monday.

Raising the pay floor to $15 per hour by 2025 would boost wages for 17 million workers, the nonpartisan Congressional Budget Office estimated. At the same time, 1.3 million people would lose jobs, according to the CBO projections.

Earlier this year, House Democrats led by Rep. Bobby Scott, D-Va., introduced a bill to gradually raise the federal minimum wage to $15 per hour by 2024. The party has argued that doing so would lift workers out of poverty and kick-start economic growth.

Opponents of hiking the pay floor to that level — more than twice the current U.S. minimum wage of $7.25 that took effect in 2009 — argue it would cut positions for minimum wage workers amid higher costs.

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CBO: Boost wages for 17 million people earning less than $15

The House could vote on the Democratic legislation, called the Raise the Wage Act, later this month. It is expected to pass, though the GOP-held Senate likely will not take it up. President Donald Trump could also oppose it.

Though the bill may not become law, Democrats view it as a way to portray themselves as better for the working class than Republicans as the 2020 elections approach. Every major Democratic candidate for president has endorsed a $15 per hour minimum wage. More than 200 House Democrats — including many who will face competitive reelection bids next year — have backed the bill.

"What the report makes clear is that the benefits vastly outweigh any cost," Scott told reporters on a call Monday. He said he feels "confident" the House has the votes to pass the bill when it votes this month.

Twenty-nine states and Washington D.C. have higher minimum wages than the federal level of $7.25. Seven states have also passed $15 per hour wage floors.

Here are the estimated effects of hiking the federal minimum wage to $15 per hour, according to CBO projections:

  • 17 million U.S. workers who would otherwise make less than $15 would get a raise. Another 10 million Americans "otherwise earning slightly more" than $15 an hour may also see a wage hike, according to the CBO.
  • The pay increases would take the annual income of 1.3 million people above the poverty level.
  • It would result in 1.3 million more jobless Americans, according to the CBO. Both Scott and Heidi Shierholz — chief economist at the Labor Department during part of the Obama administration — argued the CBO's methods in assessing job losses were flawed. Shierholz said she believes the CBO "substantially overstates the costs" of hiking the minimum wage.
  • Hiking the pay floor would "reduce business income and raise prices" as companies pass on higher labor costs to consumers, the CBO said. It would also "reduce the nation's output slightly" a decline in capital such as buildings and machines, the nonpartisan agency said.
  • The wage increases would cause total real family income — adjusted for inflation — to fall by 0.1%.
  • The CBO also assessed the potential effects of raising the minimum wage to both $12 and $10 per hour by 2025. Both hikes would have similar, but more muted, effects on wages and employment.

Democrats have tried for years to raise the federal minimum wage. The U.S. pay floor has not budged in a decade. But some disagreements have emerged over what the appropriate minimum wage is and how quickly to increase it.

Some center-left Democrats representing lower-cost parts of the country hesitated to back a $15 per hour U.S. minimum wage. In part to appease those concerns, Rep. Tom O'Halleran, D-Ariz., and Rep. Stephanie Murphy, D-Fla., proposed an amendment to Scott's bill that would require a Government Accountability Office report on the effects of the minimum wage increases.

Under that amendment, the GAO would prepare a report after two of the minimum wage hikes took the federal pay floor to $9.85. House and Senate committees could then make recommendations on changes to reduce any negative effects from the pay increases.

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