Some 27 million low-income Americans would get a financial boost if the federal minimum wage were doubled to $15, but another 1.3 million could lose their jobs, a congressional study estimates.
The Congressional Budget Office looked at options to raise the current $7.25 minimum wage to either $10, $12 or $15 an hour. A big increase would spread the benefits more widely, but also raise the potential costs, the agency concluded in a widely anticipated study.
The Democratic-controlled House is planning to vote soon on a bill to lift the national minimum wage for the first time since 2009 to $15 an hour. The bill faces low odds in the Republican-led Senate, however.
Many states and cities have sharply increased minimum wages in the past few years, with some set to raise them eventually to $15 an hour. Some major employers such as Amazon
have also adopted minimum pay rates of $15 an hour.
The CBO, a bipartisan agency that advises Congress, said a $15 federal minimum by 2025 would boost the wages of 17 million workers “who would otherwise earn less than $15 an hour.”
An additional 10 million who earned slightly more than $15 an hour might see their wages rise as well, the CBO said.
The potential downside? About 1.3 million people could lose their jobs, according to the CBO’s median estimate. Nearly half would be teenagers.
“For most low-wage workers, earnings and family income would increase, which would lift some families out of poverty. But other low-wage workers would become jobless, and their family income would fall — in some cases, below the poverty threshold,” the agency said.
Estimated job losses based on a $15 floor ranged from zero to 3.7 million.
Why such a large gap? For one thing, CBO analysts can’t predict to what extent worker pay would rise naturally in the absence of a minimum-wage increase.
Consider recent decisions by Amazon and other large firms to increase pay. One of the chief reasons they’ve done so is to attract more skilled workers in a highly competitive labor market characterized by the lowest unemployment rate in nearly half a century.
The agency is also unsure how companies would react.
The economics profession itself is divided. It’s long been a staple of economic literature that higher minimum wages lead to more job losses. Higher prices are strongly associated with lower demand.
Yet a handful of major studies since the early 1990s suggest higher minimum wages don’t necessarily lead to lower employment. A host of variables affect hiring decisions and staffing levels, including the availability of labor and the overall health of the economy.
“Findings in the research literature about how changes in the federal minimum wage affect employment vary widely,” the CBO acknowledged. “Many studies have found little or no effect of minimum wages on employment, but many others have found substantial reductions in employment.”
The CBO said a smaller increase in the U.S. minimum wage would have more modest impact.
The agency estimated a $12 federal minimum wage would help about 11 million workers and lead to median job losses of 300,000.
A $10 minimum would raise wages for about 3.5 million workers and have almost no effect on jobs.
Groups that support a higher minimum wage said the new study gives Congress ammunition to act.
“Today’s CBO report confirms what we’ve known all along: the Raise the Wage Act will benefit an estimated 27 million workers, reduce poverty and reduce inequality,’ said Christine Owens, executive director of the National Employment Law Project.
Douglas Holtz-Eakin, president of the conservative-leaning American Action Forum, argued that raising the minimum wage does nothing to boost overall income for poorer Americans.
“Gains to low-wage workers come at the expense of others — notably the newly unemployed,’ he said in a tweet.