$15 minimum wage divides Dems

Democrats are divided on how much to lift the nation’s minimum wage, an issue that has long united the party.

Presidential candidate Sen. Bernie Sanders (I-Vt.) is pushing to raise the federal wage from its current $7.25 an hour to $15. But budget experts warn such a hike could eliminate millions of U.S. jobs.

{mosads}Many liberals on and off Capitol Hill have embraced the $15 figure, seeing it as an important remedy for addressing the nation’s growing income disparity. Democratic leaders, however, have been reluctant to back it, rallying instead around smaller increases.

Senate Minority Leader Harry Reid (D-Nev.) and House Minority Leader Nancy Pelosi (D-Calif.) want to push the minimum wage to $12 per hour. President Obama has edged his support to higher levels in recent years, from $9 to $10.10 and now $12. Hillary Clinton, the Democratic presidential front-runner, backed $15 per hour for New York fast-food workers on Friday but hasn’t specified a wage floor for the nation.

The various positions underscore the tightrope party leaders are walking on the minimum wage increase, a concept highly popular among voters.

Unlike prior battles with Democrats on the issue, Republicans have significant ammunition in this fight. They point out that raising the minimum wage would mean lost jobs.

The Congressional Budget Office (CBO), Congress’s official score-keeper, issued a report last year estimating that, while an increase in the minimum wage to $10.10 would hike incomes for roughly 16.5 million workers, it would leave another 500,000 unemployed.

A former CBO director said this week that a hike to $15 per hour would eliminate “many more jobs … because it would cut much further into the distribution of wages.”

“The effect is not linear, it rises much faster,” said the ex-CBO chief, who requested anonymity.

With the issue playing a prominent role on the campaign trail, Republicans in Congress could ask the CBO to issue a new report on the effect a $15 wage would have on jobs.

The 2014 CBO report quickly became a political football, with opponents of the wage hike — including most Republicans and businesses groups — warning that it would harm the economy. 

Proponents, including most Democrats and workers’ rights groups, dismissed the findings as wildly inaccurate, citing estimates from a long list of economists who contend the increase would either create jobs or have no impact on employment numbers at all.

Both sides of the debate come armed with their own statistics.

On Monday, the American Action Forum, a conservative policy group, released a new study finding that hikes in the minimum wage to either $12 or $15 per hour would not only decrease employment but would also largely fail to benefit the poorest workers they are designed to help.

Conducted by Douglas Holtz-Eakin, who headed the CBO from 2003 to 2005, the report found that a wage hike to $15 would transfer an additional $105 billion to low-wage workers, but less than 7 percent of the money would benefit those living in poverty. Meanwhile, 6.6 million jobs would be eliminated.

“The CBO said this was a misdemeanor,” Holtz-Eakin said Monday by phone, referring to the CBO’s 2014 report. “Why would you commit a felony? It’s just not a good idea.”

Democrats and many liberal economists have soundly rejected such claims. They note that the current minimum wage of $7.25 per hour, enacted by President George W. Bush, has been in place since 2009, even as wage stagnation has prevented most incomes from keeping pace with inflation and the rest of the economy. 

To combat that trend, Sanders and Reps. Keith Ellison (D-Minn.) and Raúl Grijalva (D-Ariz.), the leaders of the Congressional Progressive Caucus, unveiled legislation last week that would raies the minimum wage to $15 per hour by 2020 and index future increases to median wages beginning in 2021.

The proposal was accompanied by an endorsement letter from more than 200 economists, including Robert Reich, a former Labor secretary under President Clinton, who said the threat to jobs is vastly overblown.

“The weight of evidence from the extensive professional literature has, for decades, consistently found that no significant effects on employment opportunities result when the minimum wage rises in reasonable increments,” the economists wrote. “This is because the increases in overall business costs resulting from a minimum wage increase are, for the most part, modest.”

While some Democratic leaders have voiced their support for local laws hiking the wage to $15, they haven’t endorsed the same increase on the federal level. Instead, Reid, Pelosi and Obama have thrown their weight behind a separate proposal, sponsored by Sen. Patty Murray (D-Wash.) and Rep. Bobby Scott (D-Va.), that would raise the minimum wage to $12 per hour by 2020.

“With this one act, we could give a raise to more than 25 million working people, lift up to 4.5 million Americans out of poverty and generate some $22 billion in increased economic activity,” Pelosi said last week, endorsing the $12 proposal.

A New York Times/CBS News poll released last month found that a commanding 71 percent of Americans back an increase to $10.10 per hour, including 50 percent of Republicans, 86 percent of Democrats and 76 percent of independents. 

Sanders has seized on such numbers both to push for his $15 proposal and to draw distinctions between his economic agenda and Clinton’s on the campaign trail.

“This is the wealthiest country in the history of the world. The problem is all of the wealth rests in the hands of a few billionaires,” Sanders said last week. “All of our workers from coast to coast need at least $15 an hour.”

Alice Rivlin, the CBO’s founding director, suggested the cautious approach from Democratic leaders is well advised.

“I think $15 is too big a jump,” she said, though emphasizing her “excitement” with the move toward a $15 wage in certain high-income localities such as New York, Seattle and Portland. Those experiments, she said, will give Congress a better idea how to move on the federal level, and that, along with a hike in the earned income tax credit, would help improve the post-recession economy.

Sanders, Rivlin added, is “doing a service being out there” promoting the $15 wage hike, which might make a smaller wage hike easier to accomplish.

Two Republicans running for the White House, former Sen. Rick Santorum (Pa.) and retired neurosurgeon Ben Carson, support raising the minimum wage. Santorum has proposed an increase of 50 cents per year for three years. Carson said in May that the wage “should be higher” than it is now.

UPDATED 10:26 A.M. Pelosi updated her position on Tuesday morning, after this story was first published. Asked about whether she’d support a $15 federal minimum wage, she told reporters: “$12 may be what can pass but I’m for $15 per hour.”

Tags Bernie Sanders Macroeconomics

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