Democrats on the House Education and Labor Committee have marked up legislation under the rules of budget reconciliation to gradually increase the minimum wage to $15 per hour. (The relevant provision in the link is Sec. 2101.)
The Raise the Wage Act, which has been reintroduced as H.R. 603 and S. 53, has been viewed as a messaging bill with no real chance of passage. And every House and Senate Democrat from Georgia, with the exception of Rep. Carolyn Bourdeaux, has co-sponsored the bill in their respective chamber.
The inclusion of the Raise the Wage Act in a budget reconciliation bill changes that dynamic. Now, you’re playing with fire. Because legislation produced via budget reconciliation is privileged, the traditional filibuster doesn’t apply. Only 51 votes are needed to pass reconciliation legislation.
Reconciliation gets tricky because the process is supposed to be limited to direct (or mandatory) spending, revenues, and the debt limit. Despite these limitations, the Raise the Wage Act appears in the Education and Labor reconciliation recommendations.
Whether the Raise the Wage Act survives a Byrd bath, during which extraneous provisions are removed from reconciliation legislation, or Byrd rule is uncertain. What’s more, Sen. Joe Manchin (D-WV) has expressed opposition to its inclusion. President Biden certainly seems to be unwilling to violate the basic norms of reconciliation to include the Raise the Wage Act, but nothing is certain until it happens, and so-called “progressives” are pressuring him to go all-in.
Let’s say that Biden and Democrats do decide to break the norms of budget reconciliation and include the Raise the Wage Act in the reconciliation legislation. What can we expect the real-world impact of a $15 minimum wage to be? Well, the Congressional Budget Office (CBO) gives us an idea.
On Monday, the CBO released a report on the budgetary and economic impact of the Raise the Wage Act. The report should be devastating for the Raise the Wage Act, but Democrats are still forging ahead with its inclusion in the reconciliation legislation.
The report notes that the Raise the Wage Act would increase the budget deficit by $54 billion over ten years, not including another $16 billion in added interest payments on the share of the debt held by the public. But the budgetary impact dwarfed by the broader impact on the economy.
Some Democrats are seizing on one particular point from the report, which shows that some 900,000 people will be lifted out of poverty as a result of the Raise the Wage Act. However, that ignores the rest of the report.
In its models, the CBO found that employment would be reduced by an average of 1.4 million workers in 2025. “[H]alf of the 1.4 million people who would be jobless because of the bill,” the report explains, “would have dropped out of the labor force.”
Of course, that figure are subject to uncertainty. The change in unemployment could be lower or greater. As the report explains, “CBO estimates that there is a one-third chance of that effect’s being between about zero and 1.0 million workers and a one-third chance of its being between 1.0 million and 2.7 million workers.”
The CBO also noted that “[y]oung, less educated people would account for a disproportionate share of those reductions in employment.” That shouldn’t surprise anyone.
Another point from the report that shouldn’t surprise anyone is the effect of the Raise the Wage Act on prices. The CBO shows that the health and medical prices would increase. Also, the cost of goods and services would increase.
“Employers would pass some of those increased costs on to consumers in the form of higher prices, and those higher prices, in turn, would lead consumers to purchase fewer goods and services,” the report explains. “Employers would consequently produce fewer goods and services, and as a result, they would tend to reduce their employment of workers at all wage levels.”
Those price increases are going to hit certain industries harder than others. The restaurant industry, for example, will be hit particularly hard. The Education and Labor reconciliation legislation would gradually increase the hourly wage for tipped workers to $15 in 2027 from its current $2.13.
Of course, higher labor costs will cause some employers to look into automation. The CBO points this out, noting, “When the cost of employing low-wage workers goes up, the relative cost of employing higher-wage workers or investing in machines and technology goes down. Some employers would therefore respond to a higher minimum wage by shifting toward those substitutes and reducing their employment of low-wage workers.”
Democrats in Georgia’s congressional delegation choose their feelings over the facts, but that decision doesn’t change the end result of the outcome of the policy. The Raise the Wage Act will hurt workers in each of their districts, and those workers will eventually look for someone to blame.