White House Counsel of Economic Advisers member Jared Bernstein brushed aside concerns raised by a new Congressional Budget Office study that showed President Biden’s proposed minimum wage hike would result in the loss of 1.4 million jobs.
Host Chris Jansing asked, “There’s a fascinating study out by the Congressional Budget Office that says it would actually cost 1.4 million jobs by 2025, but would reduce the number of Americans below the poverty line by 900,000. What’s your analysis of that, your reaction?”
Bernstein responded, “I mean, with respect, the part you just read leaves out, by far, by far, the most important number in that study, which is 27 million people get a wage increase from raising the minimum wage to $15 an hour by 2025. The other numbers that you mentioned, they do come out of the study, you’re correct about that. But we have a tendency to focus on some of the big negatives, or, in this case, the deficit impact. I think that one of the reasons that the president has consistently pushed this policy is because it is one of the fastest, most reliable, quickest ways of getting reliable help to low-income workers, many of whom have been essential workers in this economy. Fulfillment workers in warehouses, healthcare workers, sanitation workers, and yes, as you mentioned, there are job loss effects in the study, but, in fact, if you look at some of the more contemporary minimum wage research, and I’ve contributed to some of that research myself, it looks — takes a very careful look at this aspect of the problem and finds much smaller effects in that regard.”
The new CBO projections could not have been worse for Biden, who has made raising the federal minimum wage to $15 an hour a key part of his administration’s policies.
But the CBO immediately cast doubt on the idea, finding that Biden’s proposal would reduce employment by 1.4 million workers, which is more than the 900,000 it would lift out of poverty.
The CBO also found that prices would rise, wages for those not impacted by the hike would fall, higher rates of inflation would lead to slight increases in interest rates, and the 10-year budget deficit would increase by $54 billion.
“Higher wages would increase the cost to employers of producing goods and services,” the CBO concluded. “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. 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.”
An earlier CBO report from 2019 estimated that a $15 minimum wage would cost roughly 1.3 million jobs – but could cost as many as 3.7 million jobs.
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