Democratic lawmakers and President Joe Biden intend to increase the federal minimum wage from $7.25 to $15 an hour. According to a study released Monday by the Congressional Budget Office, the proposal will lift roughly 900,000 out of poverty, but will come at the cost of slashing employment by 1.4 million.
The minimum wage hike has the potential to affect 17 million workers who would earn minimum wage in an average week in 2025, when it is set to kick in. Another 10 million workers who already earn close to $15 an hour will also be affected.
Fox News reports that the measure will add $54 billion to the national deficit over the next decade, due to the result of high prices for goods and services, including long-term healthcare.
The CBO study states that government spending on nutrition programs would decline, but hiking the minimum wage would increase spending in other areas, including unemployment benefits, Social Security and other forms of government assistance.
Spending on Medicaid, which low-income Americans depend on for health insurance, would increase because the price of healthcare services would go up as more people are out of work. However, overall enrollment in Medicaid would decline due to the increase in wages.
"Employers would pass some of those increased costs on to consumers in the form of higher prices, and those higher prices, in turn, would lead consumers to purchase fewer goods and services," the study reported. "Employers would consequently produce fewer goods and services, and as a result, they would tend to reduce their employment of workers at all wage levels."
According to Fox News, Sen. Bernie Sanders, one of the bill’s loudest supporters and the author of the Raise the Wage Act, condemned the report.
“I find it hard to understand how the CBO concluded that raising the minimum wage would increase the deficit by $54 billion," he stated. "Two years ago, CBO concluded that a $15 minimum wage would increase the deficit by less than $1 million over ten years."
Sanders said the report provided evidence that congressional Democrats could use a slim Senate majority to pass the minimum wage increase in a process known as “budget reconciliation,” without violating the Byrd rule. The Byrd rule prevents extraneous provisions from being included by making it so that only items affecting the federal budget can be included, according to the Brookings Institute.
"From a Byrd Rule perspective, the CBO has demonstrated that increasing the minimum wage would have a direct and substantial impact on the federal budget," Sanders said. "What that means is that we can clearly raise the minimum wage to $15 an hour under the rules of reconciliation."
The federal minimum wage has remained stagnant for over a decade, with a growing number of states voting to adopt their own state-based wage increases.