President Joe Biden’s proposal to raise the minimum wage to $15 per hour by 2025 would cut employment by 1,4 million jobs and raise the cost of goods and services, a nonpartisan budget agency said on Monday.
The cost assessment done by the Congressional Budget Office also claims that Biden’s “Raise the Wage Act of 2021” would lift 900,000 Americans out of poverty in 2025, but it would increase the country’s budget deficit by $54 billion over ten years.
“That net increase would result from higher pay ($509 billion) for people who were employed at higher hourly wages under the bill, offset by lower pay ($175 billion) because of reduced employment under the bill,” the assessment states.
About 17 million workers whose wages fall below $15 can expect their wages rise in 2025, but the number of workers overall would decrease by 1.4 million as some companies may opt to invest more in technology and automation.
“Young, less-educated people would account for a disproportionate share of those reductions in employment,” the agency said.
The wage increase would also result in higher prices for goods and services, which will also affect federal spending, causing an increase to the budget deficit.
“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,” CBO wrote in the assessment.
The example given was that of the increased health care costs for Medicaid and Medicare through nursing homes and home health care services.
The findings may trigger a debate between the Democrats and the Republicans, with the latter opposing the President’s proposal.
White House Press Secretary Jen Psaki declined to comment on CBO’s assessment and what it meant for Biden’s proposal.
“Well I heard about the CBO score as I was walking out here so I haven’t talked with our economic team about that specifically,” she said.