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'Raise the Wage Act' Would Reduce Family Incomes, Increases Unemployment

Democrats view raising the minimum wage as a way to show they are are better for working-class Americans than Republicans. But no matter how high government sets the minimum wage, the fact remains that only people who are actually employed earn wages. Over a million fewer workers will be employed and earning wages if Democrats in Congress succeed in raising the federal minimum wage to $15 per hour.

That’s what the Congressional Budget Office (CBO) projects in a report on the impact of a $15 minimum wage. Up to 3.7 million Americans could lose their jobs if the federal minimum wage is raised to $15 per hour by 2025, according to the recent CBO report. In a best-case scenario, only 1.3 million workers would become jobless.

Still, the House is expected to vote this Thursday on that idea. The Raise the Wage Act (H.R. 582), sponsored by Rep. Bobby Scott (D-VA), would hike the minimum wage to $15 per hour by 2024. Undaunted, Rep. Scott declared he will not let this disastrous CBO assessment of his bill derail the upcoming vote. Astonishingly, Rep. Scott responded to the CBO report by stating “the benefits vastly outweigh any cost.” Yet, for the millions of workers who may find themselves unemployed because of Rep. Scott’s legislation, it is unlikely they will share that view.

Where, exactly, are the benefits of raising the minimum wage to $15 per hour? While the CBO estimates that a $15 minimum wage would lift 1.3 million out of poverty, that means for each person who is no longer living in poverty, someone else likely is because they lost their job. But if the CBO’s worst case scenario is realized—a $15 minimum wage results in 3.7 million lost jobs—roughly three workers would lose their job for each person lifted out of poverty.

“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,” as Michael Saltsman, managing director of the Employment Policies Institute, explained in the The Wall Street Journal.

Even more concerning are the long-term impact on low-wage workers. As the CBO points out, those who lose their job from a minimum wage increase will see their skills decay due to being out of the workforce, which can result in “long-lasting reductions in family income.” Other studies back up this conclusion. In particular, young people will feel a long-lasting reduction in income from a $15 minimum wage that prices them out of the workforce during their youth.

A study that examined data from the National Longitudinal Survey of Youth, which spans three decades, measured the benefit of getting an early start in the workforce. The findings show the importance of early work experience. Young adults who just took on part-time work during high school saw a wage premium over their unemployed peers. More importantly, the wage premium held over time: “Checking in when the respondents were in their 40s or 50s, the wage premium held up: The people who held a job in high school were still earning 9.4 percent more per hour.”

Workers are far from alone in feeling the ill-effects of a $15 minimum wage. As explained in a coalition letter released by the Competitive Enterprise Institute that opposes the Raise the Wage act, businesses and consumers will face higher costs:

And, importantly, raising the minimum wage comes at an expense of the unemployed, businesses, and higher prices for consumers. A $15 minimum wage results in business owners’ income decreasing by $14 billion, earnings of unemployed individuals would decrease by $20 billion, and income of consumers would decrease by $39 billion, according to CBO estimates.

It may sound altruistic to advocate raising the minimum wage, but the consequences of such a policy are dangerous and result in millions losing their job and taking home less income. Everyone wants workers to earn more and build financial security, but the Raise the Wage Act will fail to achieve that goal.