How Many Jobs Would the $15 Minimum Wage Kill?
Author: Michael Saltsman
Publication Date: July 2019
Newspaper: Wall Street Journal
Topics: Living Wage
This is one political promise it’s OK to break. Democrats pledged a $15-an-hour minimum wage while campaigning in 2018, and all but three of the party’s 2020 presidential candidates endorse the increase. But a new report from the Congressional Budget Office finds the policy could leave nearly four million workers without a job.
This week’s analysis is an update of CBO’s 2014 analysis of a $10.10 minimum wage, which said one million workers would be pulled out of poverty at the cost of half a million jobs. That conclusion was enough to tank the proposal; a Bloomberg poll at the time found that 57% of Americans viewed the jobs trade-off as “unacceptable.”
Democrats have responded to CBO’s wage warning by ignoring it. The Raise the Wage Act of 2019, introduced in January, would set a $15 minimum wage by 2024. The trade-offs from this legislation are even worse than in 2014. CBO finds a $15 minimum wage would pull 1.3 million workers out of poverty at the cost of 1.3 million jobs in the median scenario, and 3.7 million jobs in the worst-case scenario.
Put differently, as many as three people would lose their jobs for each person no longer in poverty.
The CBO’s conclusions, based on a review of dozens of empirical studies, even suggest the title of the Democrats’ bill is a misnomer. The Raise the Wage Act would reduce real family income by $9 billion once phased in, as reductions in employment (among other impacts) offset the increase in some workers’ pay.
The estimated job loss from a $10 minimum wage—100,000 in the worst-case scenario—is more modest this time around. Thanks to natural wage growth and a tight labor market, thousands of businesses offer a starting wage of $10 or more, with no federal mandate. (Some states and cities, such as California and New York, have independently enacted new wage mandates; the CBO’s analysis doesn’t account for job losses in areas unaffected by the federal legislation.)
Democrats can’t afford to be cavalier about the projected impacts of $15, even in a robust economy. The CBO explains that some displaced workers could face long-term harm “if a minimum-wage increase keeps them from developing skills.” The 19.9% unemployment rate among young black Americans is still more than five times the national rate. And more than 50 counties still have an unemployment rate of 7% or higher. This includes Luna County, N.M., Apache County, Ariz., and Willacy County, Texas—counties in districts of so-called Blue Dog Democrats, who will determine whether the Raise the Wage Act passes the House.
The CBO isn’t the first nonpartisan research unit to find negative effects from $15, but it’s the least politically convenient one. Democrats have repeatedly touted the CBO’s reports in arguing against President Trump’s policy proposals; even the party’s progressive wing has described CBO research as “invaluable.” The party’s moderates now face the unenviable task of voting for a bill panned by their favorite economists.