Lisa McCormick says a recent Congressional Budget Office study on the budgetary impacts of the proposed $15 an hour minimum wage introduced last month wrongly predicted negative consequences.
McCormick said a more reliable study was done by the Center on Wage and Employment Dynamics (CWED) is a project of the Institute for Research on Labor and Employment (IRLE) at UC Berkeley.
The Raise the Wage Act of 2021, introduced by Senator Bernie Sanders and Representative Bobby Scott, would increase the federal minimum wage to $9.50 this year and then gradually to $15 by 2025. Congress is considering whether the Act could be passed as a budget reconciliation item.
To inform this debate, UC Berkeley professor Michael Reich led CWED researchers who estimated the likely effects of the wage hike on changes in federal revenues and expenditures.
Once it is fully implemented in 2025, the Act would have a positive effect on the federal budget of $65.4 billion per year.
• Pay increases for low-wage workers will add about $21.2 billion per year in payroll and income tax revenues.
• Wage increases will lead to savings of about $32 billion per year on means-tested safety net programs like food stamps, welfare, the Earned Income Tax Credit and the Childcare Tax.
• The Social Security Trust fund will realize $12.2 billion per year in savings, as some older workers delay retirement.
“A $15 federal minimum wage will generate substantial increases to payroll and income taxes and considerable savings for means-tested safety net programs and Social Security,” said Reich.
Professor Reich is the author of numerous scholarly studies of minimum wage effects on employment, which have influenced the views of the economic profession. He has also studied the effects of minimum wages on federal safety net programs, on adult health, and on child poverty.
Read the full analysis.
“While the CBO concluded that raising the minimum wage would increase the federal deficit by $54 billion, only two years ago, the same agency said that a $15 minimum wage would increase the deficit by less than $1 million over ten years,” said McCormick.
“Raising the minimum wage would amount to a significant reduction in the deficit, according to studies done by the Center on Wage and Employment Dynamics and the Economic Policy Institute,” said McCormick.
“Congressional Budget Office employees should be given a lesson on what it’s like to live on $7.25 an hour, the current federal minimum wage,” said McCormick. “Congress should end the crisis of starvation wages in America by raise the pay of America’s poorest workers to a living wage of at least $15 an hour.”
McCormick, who earned a dazzling four of ten Democratic primary votes in her 2018 race for US Senate, has been fighting for government action to improve the quality of life for the working class.
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