Democrats' $15 minimum wage hike would reduce employment by 1.4M jobs, CBO says

A push by Democratic lawmakers and President Biden to increase the federal minimum wage from $7.25 to $15 an hour by 2025 would cut employment by 1.4 million and would lift roughly 900,000 Americans out of poverty, according to a study released Monday by the Congressional Budget Office.

The proposed change would affect 17 million workers who earn the minimum wage in an average week in 2025, the year the new minimum wage would kick-in, as well as another 10 million workers who already earn close to $15 an hour, the non-partisan agency said.

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The measure would also add $54 billion to the nation's deficit over the next decade, according to the CBO study, the result of higher prices for goods and services, such as long-term health care.

Although government spending on nutrition programs would decline, hiking the minimum wage would increase spending in other areas, including unemployment aid, Social Security benefits and other health care programs.

For instance, spending on Medicaid, which provides health insurance to low-income Americans, would increase because health care services would cost more and more people would be out of work -- even though overall enrollment would decline due to the minimum wage increase.

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"Employers would pass some of those increased costs on to consumers in the form of higher prices, and those higher prices, in turn, would lead consumers to purchase fewer goods and services," the study said. "Employers would consequently produce fewer goods and services, and as a result, they would tend to reduce their employment of workers at all wage levels."

Vermont Sen. Bernie Sanders, one of the biggest proponents of increasing the minimum wage and the author of the Raise the Wage Act, slammed the CBO's report.

“I find it hard to understand how the CBO concluded that raising the minimum wage would increase the deficit by $54 billion," he said in a statement. "Two years ago, CBO concluded that a $15 minimum wage would increase the deficit by less than $1 million over ten years."

But Sanders said the report provided evidence that Democrats could use their slimmest-possible Senate majority to pass a minimum wage increase via a process known as "budget reconciliation" without violating the so-called "Byrd rule." The rule prevents "extraneous" provisions from being included in reconciliation so that only items affecting the federal budget can be included.

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"From a Byrd Rule perspective, the CBO has demonstrated that increasing the minimum wage would have a direct and substantial impact on the federal budget," Sanders, an independent who caucuses with Democrats, said. "What that means is that we can clearly raise the minimum wage to $15 an hour under the rules of reconciliation."

The federal minimum wage has not increased in more than a decade, although a growing number of states have voted to adopt their own wage increases. There are 29 states with wages above the federal minimum wage, according to the National Conference of State Legislatures. At $14 an hour, California currently has the highest minimum wage in the nation.