According to a report released Monday, US President Joe Biden’s planned minimum wage increase would slash 1.4 million jobs but lift 900,000 people out of poverty.
According to a report by the Congressional Budget Office, the plan would also increase salaries for another 27 million employees, demonstrating that the net increase in earnings outweighs those lost by the expected job losses.
A mixed picture of the advantages of the proposal to steadily increase the wage floor in the United States to $15 an hour by 2025 from the current $7.25 is painted in the CBO study.
As part of his economic agenda, Biden has championed the rise, saying the advantages outweigh the costs.
The minimum hourly wage was last increased in 2009 after a phased increase contained in the 2007 legislation, while higher salaries were required by some states.
The legislation has been identified by supporters as a key element in addressing widening US income inequality, especially in non-white communities that have suffered disproportionately from the Covid-19 virus.
But critics have cautioned that small businesses could be affected by the rise.
In a CBS interview last week, Biden admitted that the $15 minimum wage would probably not be included in the economic stimulus package of $1.9 trillion, but he said he remained committed to the issue.
The CBO report projected that higher salaries would cause employers to pass on some of the higher costs to customers, leading to lower demand and potentially resulting in job losses. The research also noted that many businesses would transition to automation.
However, the study also noted that raising salaries for low-income families would raise consumption by low-income workers, which, after the wage increase took effect, would “reduce the drop in jobs for several years.”
The study predicts that net salaries will rise by $333 billion over a decade through 2031, with higher salaries of $509 billion, more than offsetting the $175 billion in lost income due to planned job cuts.
There is large debate and little consensus among economists on the effects of minimum wage hikes.
A centrist think tank, the Economic Policy Institute, said the CBO study was “just wrong” on Monday and pointed to other studies that showed no negative hit on jobs.
SOURCE: THE GUARDIAN