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.
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