CBO report should spike $15 minimum wage legislation
Just in time for next week’s potential House of Representatives vote on the Raise the Wage Act, which would increase the federal minimum wage to $15, the nonpartisan Congressional Budget Office is out with a damning new report on the bill’s consequences.
Congress’s official budget scorekeeper estimates that a $15 minimum wage would cost up to 3.7 million jobs, with median job loss expected at 1.3 million — about 7 percent of the nation’s entry-level workers and 1 percent of the overall workforce.
The finding is sobering for minimum wage hike activists who for years have ignored the real-world stories of minimum wage harm to claim that a $15 minimum wage has no employment consequences.
Armed with this new information, legislators should scrap their job-killing minimum wage plans and refocus their workforce efforts on finding out how to match low-wage workers with the millions of available jobs that pay middle-class wages. Call it a Fight for $50 — as in a fight for careers that pay $50,000 or more.
At a press call following the CBO report’s release, Rep. Bobby Scott (D-Va.), sponsor of the Raise the Wage Act, tried to spin the findings. He claimed the report’s bottom line is that the $15 minimum wage would help more than it hurts. That’s easy for him to say; his job isn’t on the line.
Of course it’s true that mandating a higher wage will help the people who are able to keep their jobs in the aftermath. Coincidentally, the CBO also found that 1.3 million people would emerge from poverty thanks to the wage hike. But is this one-for-one tradeoff acceptable? Not if you care about employment opportunities for the most vulnerable Americans.
Unsurprisingly, the CBO concludes that women, workers without a high school degree, and part-time employees would bear the brunt of the impact. Some of these victims actually would be pushed into poverty because of a $15 minimum wage. The harsh reality is that those who benefit from a $15 minimum wage likely are the ones who don’t need it; they’re the most productive employees, from better schools and stable families, who would be earning $15 soon with or without a minimum wage increase.
Ironically, the CBO finds that a $15 minimum wage would reduce family incomes by $9 billion. Speaking of unintended consequences, a blockbuster University of Washington minimum wage study in 2017 found that Seattle’s incoming $15 minimum wage reduced wages among entry-level employees there by $125 a month, because employers were forced to cut hours and jobs to make up for increased labor costs. (That figure later was revised to $74.)
But the biggest consequence of a $15 minimum wage is the impact that it would have in weakening the first rung of the career ladder, which is needed to teach employees the skills necessary to climb it. According to the CBO report, “Low-wage workers who are jobless because of a minimum-wage increase cannot acquire skills through formal on-the-job training or informal learning by doing. Reductions in training might occur even among employed workers if firms cut their spending on training to offset their higher payroll expenses.” As a result, it concludes, career prospects would be negatively impacted.
Reducing on-the-job training opportunities would only exacerbate the skills gap. There are currently 7.3 million unfilled jobs, millions of which, according to the Labor Department, pay around $50,000 a year or more. Public policy solutions to fill these good careers, such as professional and vocational skills training initiatives, easily could generate bipartisan support. Yet in order for employees to reach the second and third rungs on the career ladder, the first rung must be protected. As the CBO report details, a $15 minimum wage would corrode it.
The CBO report should act as smelling salts to wake up legislators considering voting for the Raise the Wage Act. Everyone is in favor of higher wages, but as this report demonstrates, a $15 minimum wage would substantially counteract that goal.
Alfredo Ortiz is the president and CEO of the Job Creators Network.