The agency has a new analysis of the Democrats’ $15 plan. The key conclusions:
- The proposal would reduce employment by 0.9 percent, or 1.4 million workers, in 2025, the first year the full $15 wage would be in effect. As I’ve discussed recently, the employment effects of the minimum wage are hotly contested, but most research does suggest there will be some damage.
- However, affected workers would make more, on net: Folks who got raises would make $509 billion more between 2021 and 2031, and only $175 billion would be lost through the employment effects. The number of people in poverty would decline on net too, by 0.9 million.
- The budget deficit would increase by $54 billion over ten years, though there are effects of the minimum wage that cut both ways. People thrown out of jobs would collect unemployment and Medicaid, for instance, while folks who got raises would pay more in taxes and rely on the safety net less. The federal government would also have to pay the $15 wage itself, as well as pay higher prices for various products it buys, because minimum-wage hikes are often passed through to consumers rather than borne by business owners. Social Security would also get more expensive, because benefits are indexed to prices. And to the extent business owners do pay for the wage hike, their own taxable income will decline.
Obviously, the CBO is hardly infallible, and the agency itself admits there’s a lot of uncertainty. But the big employment impact and the hit to the budget are not great for the policy’s proponents.