Raising the federally set minimum wage from $7.25 to $15 an hour would lift nearly 1 million people out of poverty and raise wages for millions of Americans, according to the federal government's nonpartisan budget office.
But the Congressional Budget Office also reports that the wage increase could raise the federal deficit by $54 billion over 10 years, a more dramatic increase than one predicted in a similar CBO report from just two years ago.
The 2021 report says a wage increase could lead to 1.4 million job cuts by 2025, but it also would lift 900,000 people out of poverty and raise incomes for 17 million people, or roughly 10 per cent of the US workforce. Another 10 million workers who earn slightly more than $15 per hour would also see pay raises.
"I find it hard to understand how the CBO concluded that raising the minimum wage would increase the deficit to $54 billion" compared to projected deficit increase of just $1 million over 10 years in a 2019 report, Senator Bernie Sanders said in a statement on Monday.
In 2019, the CBO reported that a $15 federal minimum wage would raise incomes for 27 million Americans, immediately lift 1.3 million Americans out of poverty, and give raises to nearly one-third of all Black workers and one-quarter of Latino workers.
As members of Congress debate the contours of Joe Biden’s proposed $1.9 trillion coronavirus relief legislation, which is critical to his administration’s efforts to combat the pandemic, Democratic lawmakers have sought to approve the package through a budget reconciliation process reserved for spending and debt legislation that can bypass Republican support in the Senate, with a tie-breaking vote from Vice President Kamala Harris.
"We are never going to get 10 Republicans to increase the minimum wage through 'regular order'," Senator Sanders said in a statement.
"The only way to increase the minimum wage to $15 now is to pass it with 51 votes through budget reconciliation," he said. "I look forward to working with my colleagues in the House and the Senate to end the crisis of starvation wages in America."
He told CNN on Sunday that lawmakers “have a room full of lawyers working as hard as we can” to argue to the Senate’s rule-setting parliamentarian that including the wage hike is “consistent with reconciliation rules.”
In an interview with CBS on Sunday, the president said he did not expect raising the federal minimum wage in the current coronavirus relief legislation to survive negotiations.
But White House press secretary Jen Psaki told reporters on Monday that the president “remains firmly committed” to raising wages, stressing that “any American working a full-time job” should not be at the poverty level.
“In terms of what the options are, we’ll see what the parliamentarian decides and then we’ll see what additional options are, but we’re getting a little ahead of where we are in the process,” she said.
Seven states and Washington DC have passed legislation to raise their minimum wages to $15. New York, California and Massachusetts became the first states to do so.
But $7.25 an hour remains the minimum wage in 21 other states. Alabama, Louisiana, Mississippi, New Hampshire, South Carolina and Tennessee don’t have a state-set minimum wage, instead relying on the federal rate. Georgia and Wyoming have set their minimum to just $5.15, lower than the federal rate, which applies instead.
The Economic Policy Institute reported that the minimum wage, if adjusted for inflation, should have exceeded $15 by 2020.
“Yet since the late 1960s, lawmakers have let the value of the minimum wage erode, allowing inflation to gradually reduce the buying power of a minimum wage income,” according to the group's 2019 report.
The gradual increases in the years that followed have been too small to meet the decline in wage value after 1968, when the minimum wage peaked at its inflation-adjusted terms, the report found.
A $7.25 wage in 2018 was worth 14.8 per cent less than when it was last raised nearly 10 years earlier, after adjusting for inflation, and 28.6 per cent below its peak value in 1968, when the minimum wage was the equivalent of $10.15 in 2018 dollars, according to the organisation.
“This decline in purchasing power means low-wage workers have to work longer hours now just to achieve the standard of living that was considered the bare minimum half a century ago," the report said.
The Raise the Wage Act supported by Senator Sanders and 37 congressional Democrats would add $2.25 to the federal minimum every year through 2025. After that, the wage would be indexed to median wage growth.
It also would phase out the current sub-minimum wage for tipped workers, who have earned a minimum hourly wage of $2.13 since 1991.
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