Biden’s $15 Wage Bid Hits Headwind in CBO Job-Loss Warning


President Joe Biden’s quest to increase the minimum wage to $15 an hour as part of his $1.9 trillion pandemic-relief package may have hit a political and procedural roadblock in a new report from the non-partisan Congressional Budget Office.

The CBO said Monday the move would boost jobless rolls by 1.4 million by 2025, even as 900,000 people get lifted out of poverty. The scorekeeper also estimated in its report that the proposal would increase budget deficits by $54 billion over 10 years.

The projections are feeding Republican arguments that the measure is a job-killer. Senate Minority Leader Mitch McConnell highlighted the CBO report on the Senate floor Monday, saying, “Nonpartisan experts say it would send more people to the unemployment line than it would lift out of poverty.”

The report also set off a debate about whether it can win inclusion in the aid package congressional Democratic leaders are assembling. Senate rules say the item must have a fiscal impact to qualify for the legislative process Democrats are using -- the question now is whether the CBO’s deficit impact is significant enough to meet that requirement.

“The CBO’s report strengthens the case for gradually raising the minimum wage through the Covid-19 rescue package,” said Representative Bobby Scott, chair of the House Education and Labor Committee, which has jurisdiction over the minimum wage. Senate Budget Chairman Bernie Sanders also said the CBO’s release validated his view that the measure can be included.

Senate Rule

The Scott and Sanders argument is certain to be contested, however. If a provision has only “merely incidental” budgetary effects, it can be struck from the reconciliation bill that Democrats are using for the pandemic-relief package. That’s according to the so-called Byrd rule.

“It would be hard to argue that it does not have a budgetary consequence and therefore may not be subject to the Byrd rule. But I would still think, relative to the size of the labor market it is ‘merely incidental,’” said Bill Hoagland, a former Senate Budget Committee director who’s now with the Bipartisan Policy Center.

The CBO report creates another procedural obstacle that could be even more difficult to overcome. It says increasing the wage creates a deficit after 10 years, also a violation of the Senate Byrd rule.

Marc Goldwein, an analyst with the Committee for a Responsible Federal Budget, said that means spending cuts or revenue increases would have to be found to pay for the wage increase.

Biden Not Optimistic

Democrats could still move to overrule the Senate parliamentarian, who makes judgments on legislative procedure, but that’s fraught with risk, as it would set off a bitter partisan battle.

The Senate in a non-binding vote last week backed the concept of waiting until the end of the pandemic to raise the wage, amid warnings that it would hurt employers trying to stay afloat in the meantime.

Biden said in a CBS interview Friday that a wage increase “apparently” wouldn’t be part of the package due to Senate rules. But the House Education and Labor committee made clear Monday it is moving forward, releasing draft stimulus-bill text with the minimum-wage increase included.

A White House spokesperson argued that a higher minimum wage forms just one part of Biden’s overall economic plan, which would create new jobs that weren’t a factor in the CBO analysis. The spokesperson also said the White House considered the job loss estimate as overstated.

White House economic adviser Jared Bernstein said on MSNBC: “With respect, it leaves out by far the most important number in that study, which is 27 million people get a wage increase from raising the minimum wage to $15 an hour by 2025.”

The CBO estimate finds that the wage increase will lead to higher prices for goods and services that the federal government will have to pay, including through the Medicare and Medicaid programs. Lost jobs would lead to higher spending on unemployment compensation, while increased wages for the working poor who keep their jobs would result in less spending on food stamps and higher tax revenue, the CBO said.

Left-leaning economists disputed the CBO’s findings. Ben Zipperer, of the Economic Policy Institute, said the CBO’s job-loss estimate is more than double the median found in a wide body of research.

Methodology Shift

The CBO made an adjustment to its methodology -- focusing on the average instead of the median -- that skewed the job-loss impact to look worse than it previously estimated. The agency found that a higher minimum wage would lead to a median 1.1 million jobs lost in the next five years, smaller than its previous estimate and the 1.4 million average figure it highlighted in Monday’s report.

“The CBO has stepped outside its bounds and is not speaking truth to power but is giving information that is misleading,” said William Spriggs, chief economist of the AFL-CIO. “This is not incidental to the budget -- it’s key to the budget.”

For right-leaning and pro-business groups, however, the CBO figures reinforced opposition to a $15 minimum wage.

“A $15 minimum wage will put economic recovery further out of reach for thousands of employers and employees,” said Mike Saltsman, managing director at the Employment Policies Institute think tank.

©2021 Bloomberg L.P.

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