“Employment would be reduced by 1.4 million workers, or 0.9 percent, according to CBO’s average estimate,” the agency said in a report that reported that the number taken out of poverty would be around 900,000. “The cumulative budget deficit over the 2021–2031 period would increase by $54 billion.”
The US budget deficit stands at around $573 billion, after having risen 61 percent in the first three months of fiscal 2021, the Treasury Department said in its monthly balance sheet reported on January 12. Unchanged since 2009, the minimum wage in the US stands at $7.25 per hour.
Republican lawmakers have pushed back against Biden’s Democratic attempts to include the minimum wage boost as part of the $1.9 trillion coronavirus relief bill the party seeks to pass in Congress.
Business owners and captains of industry have also argued that a hike in the minimum wage could dampen the economy and ultimately defeat efforts to reach full employment when the country recovers from the impact of COVID-19.
While those arguments appeared to be strengthened by the CBO report, the agency also said there were other economic models that presented “conflicting conclusions” to its thesis.
“Some researchers have suggested that during and after periods of high unemployment, a larger-than-average share of firms open or go out of business, and employment might be more responsive to a higher minimum wage under such conditions,” the CBO said. “But it is also possible that many of the workers who in normal times would be projected to lose their jobs because of a higher minimum wage, such as restaurant workers, have already lost their jobs because of the pandemic. In that case, the bill’s effect on employment could be weaker.”
As for the economy, the Commerce Department estimated that gross domestic product shrank 3.5 percent in 2020, after a 2.2 percent growth in 2019.