President Joe Biden wants to fulfill a campaign promise by raising the minimum wage to $15 an hour by 2025. The current federal minimum wage is $7.25, and it has not been raised since 2009, so the argument for some increase is compelling.
Advocates say wages will go up for the lowest paid workers and their lives will improve. President Biden, in an interview with CBS News on February 5, insisted that the benefit of a $15 minimum wage goes beyond the individual workers.
“And all the economics show, if you do that, the whole economy rises,” Biden said. The Washington Post Fact Checker gave Biden two Pinocchios out of a possible four for that statement, meaning Biden’s statement is only partially factual.
The rest of the story is more complicated. Earlier this month, the non-partisan Congressional Budget office released a study on the potential effects of the Raise the Wage Act of 2021. Here are a few of the conclusions:
—In 2025 when the minimum wage would reach $15 an hour, “17 million workers whose wages would otherwise be below $15 an hour would be directly affected” by making more money.
—The higher wages would lift 900,000 Americans above the poverty threshold.
—From 2021 to 2031, cumulative pay for the affected workers would increase by $333 billion.
Those are three of the clear positive benefits of a mandated higher hourly wage. However, significant shifts in labor costs do not happen in a vacuum. Here are a few other findings by the CBO:
—Employment would be reduced by 1.9 million workers because of the higher cost of labor.
—Employers would offset the higher cost of producing goods and services by passing “some of those increased costs on to consumers in the form of higher prices.”
—More employers would reduce their labor costs through mechanization and automation (think kiosks at fast food restaurants instead of humans). Those same restaurants would also have to raise prices.
The proposal to raise the minimum wage has been taken out of Biden’s $1.9 trillion Covid relief package. That is the correct move. The minimum wage should have its own debate in Congress at some point.
The Washington Post rated President Biden’s statement about a $15 minimum wage “a half truth.” When that debate begins, it is important that Senators and Representatives debate the whole truth.