Senate Budget Committee Chairman Bernie Sanders said on Monday that findings in a new Congressional Budget Office (CBO) report provide Democrats with a clear path for bypassing Republican obstruction in the Senate and raising the federal minimum wage to $15 an hour by 2025 with a simple majority.
The CBO report analyzes the economic and budgetary impacts of the Raise the Wage Act of 2021, a bill recently introduced by Sanders and other Democrats that would raise the federal minimum wage in five steps over the next four years, with an initial increase to $9.50 in 2021. If passed, the legislation would lift nearly 1 million workers and family members out of poverty and benefit 27 million workers across the country by increasing wages by a net $333 billion over the next decade, according to the CBO’s estimates.
Progressive economists said the report, while imperfect, confirms that gradually raising the federal hourly minimum from $7.25 to $15 would begin to address rampant inequality that ballooned in the United States in recent decades and was laid bare by the COVID pandemic and movements for racial justice.
“Income would also shift toward lower-income people and away from higher-income people under the bill,” said Heidi Shierholz, a senior economist at the Economic Policy Institute (EPI), during a call with reporters on Monday.
President Biden has called on Congress to raise the federal minimum wage to $15 and pass the $1.9 trillion pandemic relief package to aid struggling families and the economy, but on Sunday the president said he doubted the minimum wage push would survive bipartisan relief negotiations. Democrats hold 50 seats in the Senate, and at least 60 votes are needed to avoid a filibuster and bring legislation to a vote under current Senate rules. Even Sanders said it would be impossible to get 10 Republicans to support a wage hike.
However, the CBO estimates that raising the minimum wage would increase the federal budget deficit by $54 billion, giving Democrats the opportunity to pass the Raise the Wage Act by a simple majority under budget reconciliation rules for legislation concerning federal spending. Now that the CBO has confirmed that the wage hike would impact the federal budget, Sanders is moving to pass the bill as part of the budget reconciliation process between the House and Senate, a procedural maneuver Democrats are preparing to use for passing the broader pandemic relief package.
While Sanders and progressive economists disagree with CBO’s budget deficit estimate — Sanders said a previous CBO study on raising the minimum wage that calculated a deficit under $1 million over 10 years — the “good news” is that Democrats could raise the minimum wage with 50 votes plus a tie-breaker from Vice President Kamala Harris.
“What that means is we can clearly raise the minimum wage to $15 an hour under the rules of reconciliation,” Sanders said in a statement, adding that he is looking forward to finally ending the “crisis of starvation wages” in the U.S.
Sanders and allied Democrats may still face procedural challenges as well as pushback from at least one conservative Democrat, Sen. Joe Manchin of West Virginia, who has opposed raising the minimum wage to $15 an hour.
The federal wage floor has been stuck at $7.25 for over a decade and remains there in several states, but many conservatives still oppose a wage hike, often arguing that it would cause job losses. While the Raise the Wage Act would boost incomes for tens of millions of people, the CBO estimates that 1.4 million jobs would be lost under the proposal. That’s because some economists expect employers to offset the cost of higher wages by providing fewer jobs or laying off workers rather than cutting into corporate profits and executive salaries.
Shierholz and other economists on Monday’s press call said there is good reason to question CBO’s deficit and job-loss estimates, which may be based on outdated models and possibly a flawed study on a minimum wage hike in Seattle, Washington. They said recent research has found that minimum wage hikes have relatively little impact on the number of jobs available to low-wage workers but are highly effective at raising incomes. Higher incomes for workers would also reduce government spending on certain assistance programs for low-income people and generate more tax revenue from the labor pool, which can help close gaps in the federal deficit.
“It’s really not a stretch to say that a new consensus has emerged among economists that minimum wage increases have raised wages without substantial job losses, and CBO’s assessment of the literature just hasn’t caught up yet,” Shierholz said.
Still, even if raising the minimum wage would cause some job losses and cost the government extra money, proponents say these trade-offs are outweighed by the benefits.
“I think the bottom line is that CBO finds that the benefits to low-wage workers of a $15 minimum wage far outweigh the costs,” Shierholz said, adding that an earlier CBO report found that nearly half of the people raised out of poverty by a higher minimum wage would be children.
Economists say the benefits may be even greater than what CBO estimates. EPI found that Sanders’s legislation would boost incomes for 32 million people or about 21 percent of the workforce, including nearly one-third of Black workers and a quarter of Latinx workers. People of color are disproportionately represented among low-wage workers who lost jobs during the pandemic or kept the economy going by working despite the risk.
Shierholz said the CBO report confirms what progressive economists and activists have long emphasized: Raising the minimum wage is an effective tool for redistributing wealth. In this time of crisis, she said, it would increase earnings and living standards for low-wage workers who have borne the brunt of the pandemic. For this reason, the economists on Monday’s call argued that it makes sense to pass a minimum wage hike as part of the broader pandemic relief package, as Biden originally proposed.
On Friday, Senate Democrats started a budget reconciliation process that would allow the majority to pass Biden’s pandemic relief package without a single Republican vote. On Monday, Sanders made it clear that Democrats would have no excuse for failing to raise the minimum wage as well.
We’re not backing down in the face of Trump’s threats.
As Donald Trump is inaugurated a second time, independent media organizations are faced with urgent mandates: Tell the truth more loudly than ever before. Do that work even as our standard modes of distribution (such as social media platforms) are being manipulated and curtailed by forces of fascist repression and ruthless capitalism. Do that work even as journalism and journalists face targeted attacks, including from the government itself. And do that work in community, never forgetting that we’re not shouting into a faceless void – we’re reaching out to real people amid a life-threatening political climate.
Our task is formidable, and it requires us to ground ourselves in our principles, remind ourselves of our utility, dig in and commit.
As a dizzying number of corporate news organizations – either through need or greed – rush to implement new ways to further monetize their content, and others acquiesce to Trump’s wishes, now is a time for movement media-makers to double down on community-first models.
At Truthout, we are reaffirming our commitments on this front: We won’t run ads or have a paywall because we believe that everyone should have access to information, and that access should exist without barriers and free of distractions from craven corporate interests. We recognize the implications for democracy when information-seekers click a link only to find the article trapped behind a paywall or buried on a page with dozens of invasive ads. The laws of capitalism dictate an unending increase in monetization, and much of the media simply follows those laws. Truthout and many of our peers are dedicating ourselves to following other paths – a commitment which feels vital in a moment when corporations are evermore overtly embedded in government.
Over 80 percent of Truthout‘s funding comes from small individual donations from our community of readers, and the remaining 20 percent comes from a handful of social justice-oriented foundations. Over a third of our total budget is supported by recurring monthly donors, many of whom give because they want to help us keep Truthout barrier-free for everyone.
You can help by giving today. Whether you can make a small monthly donation or a larger gift, Truthout only works with your support.