Congressional Budget Office Says Minimum Wage Increase Could Cost 1.3 Million Jobs
On the campaign trail, the Biden Administration proposed raising the federal minimum wage from $7.25 to $15 an hour and they intend on pushing forward with that proposition.
According to the Congressional Budget Office (CBO), raising the minimum wage could result in a loss of 1.3 million jobs by 2025, a dive in business revenues leading to $9 billion lost in real income, and an increase in the prices of goods and services.
An example of some of the effects caused by an increase in wages can be seen in a report released by the National Bureau of Economics Research on Seattle’s 2016 increase in minimum wages to $13 from $11. The $2 increase led to a reduction in the hours worked in low-wage jobs by 9%. Keep in mind, this increase negatively affected one city and it was due to an increase of $2, but the Biden Administration and Democrats want to increase wages across the United States by more than double what it is now.
The coronavirus has done significant damage to small businesses and the workers they hire. According to a Fortune.com article published in late September 2020, nearly 100,000 small businesses that had temporarily shut down due to the pandemic ended up permanently closing.
A New York Post article reported that nearly one-third of small businesses in New York and New Jersey closed due to the pandemic, and that’s just those two states.
On top of the coronavirus, imagine what increasing the federal minimum wage would do to businesses that can barely stay afloat as it is.
The newly confirmed Secretary of the Treasury under Joe Biden, Janet Yellen, claims that raising the federal minimum wage would help the economy rather than hurt it. During her confirmation hearing Yellen contradicted the CBO report saying, “Right now we have millions of American workers who are putting their lives on the line to keep their communities functioning, and sometimes even working multiple jobs, aren’t earning enough to put food on the table and a roof over their heads.”
While an increase in minimum wages wouldn’t necessarily do significant damage to corporations and national and international chains, small businesses and mom-and-pop shops would without a doubt suffer the consequences. They’ll possibly be forced to shutter their doors if they cannot keep up with demand on a limited workforce or paying bills and payroll.
Small businesses employ about 60 million workers which is 47.3% of the private workforce in the U.S. That’s right – nearly half of the private workforce in the country is employed by small businesses, so imagine if small businesses have no choice but to close due to the uptick in federal minimum wages.
Good luck finding a job.
According to Isabel Soto, Director of Labor Market Policy at the American Action Forum, “Adding a federally mandated cost in the form of increased minimum wage would lead to longer unemployment, reduced work hours or hiring, and increased layoffs for low-wage workers as businesses balance reduced revenues and increased costs.”