Earlier this year, Sen. Bernie Sanders introduced a bill to raise the federal minimum wage up to $17 per hour and eliminate the tip credit, a hike of more than 134 percent. This week, the Congressional Budget Office released a review of the economic impacts of Sanders’ proposal, detailing the negative tradeoffs such a policy would bring.
The report not only finds a $17 federal minimum wage would exacerbate existing budget deficit woes and cause price inflation, but would also harm many of the employees it aims to help.
Some of the CBO’s key findings include:
- The bill could leave anywhere from 700,000 to 1.4 million workers jobless.
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- As many as half of those who lose their jobs will drop out of the labor force entirely.
- This will exceed estimates of employees lifted out of poverty by at least 300,000 employees.
- The job losses will be primarily among younger, less-educated employees.
“According to CBO’s assessment of the research literature, responsiveness [of employment to minimum wage changes] is more likely to be much greater than the median estimate…”
“…There is a significant possibility of large reductions in employment.”
- Reduced employment will cost $86 billion in employee earnings.
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- Tipped employees in particular will see a reduction in tips.
- Income losses will be concentrated among the poorest families affected by the increase.
“For families that lost employment because of the increase in the minimum wage, real income would fall.”
- The hike will cause price inflation.
“The largest price increases, relative to the average increase, would be for goods and services—such as food prepared in restaurants…”
- The employment loss caused by the hike will trigger an increase in spending on unemployment compensation.
“Federal spending for unemployment compensation would increase under the bill because more workers would be unemployed.”
- The bill would increase the budget deficit by $46 billion.
Read the CBO’s full report here.