Earlier this week the Congressional Budget Office (CBO) published its report on the economic viability of increasing the federal minimum wage. This information has particular weight in the debate over the national minimum wage because the CBO report is viewed as a reliable and non-partisan analysis of a proposed law.

The federal minimum wage is currently at $7.25/hour and has not changed for over a decade. This is the longest period the federal minimum wage has not been adjusted upwards since the minimum wage was set into national law in 1938.

As many also know, the fight over the federal minimum wage adjustment is about how far and how fast an increase to the minimum wage should go. On one side you have those advocating for an increase of the federal minimum wage to $15/hour. On that same side of the argument you also have advocates for an increase to $12/hour as a more reasonable middle ground. On the other side of the minimum wage movement position you have various advocates arguing for a more gradual increase to the minimum wage. Free marketers would argue leave the minimum wage alone and let the market dictate wage levels for jobs.

With the absence of a national increase to minimum wage, states and local municipalities are moving their minimum wages independent of the national minimum wage resulting in a myriad of different minimum wages across the United States. On the positive side, this allows the minimum wage to reflect what the local labor market can bare. After all, pay does differ between geographic areas. Los Angeles, New York, and Seattle’s standard of living is higher than say Raleigh, San Antonio, or Salt Lake City.  On the negative side, employers that have operations in various states or in some states with multiple municipality wages, (think California), have to set and pay different rates in different areas and even for single employees whose work takes them in and out of areas with different minimum wage rates. Oh my!

The CBO’s report was published in response to newly proposed federal minimum wage legislation currently being considered by Congress. This new attempt to pass an increase to the federal minimum wage is being called Raise the Wage Act. House bill HR 582 calls for the federal minimum wage to be increased to $15/hour, in six steps, by 2025.

The CBO report’s core concern for debate is if the minimum wage in increased, what would the cost of that increase be to the economy and the labor force? Not in terms of dollars, but in terms of lost jobs. Jobs that would go away because some employers could not support the cost of that raised minimum wage. They would have to find alternative means to getting the work done rather than hiring people at the higher wages required by the new more costly minimum wage.

The CBO’s report studied other reports from various authorities that have done their own studies that asked the question, if the minimum wage was increased “so much” ($15, $12 or just $10/hr), how many jobs would disappear from the labor force?

The report found that if the $15/hr. option was implemented, 17 million workers would benefit from an increase in their pay. Another 10 million workers making just over $15/hr. would also benefit from an increase in pay. However, the report estimated that 1.3 million workers could lose employment because of the increase to the minimum wage.

The impact would vary in different areas of the country. For example, the state of Mississippi has reported half its jobs pay less than a median rate of $15/hr. Mississippi does not have a separate minimum wage, so employers in that state would comply with the current federal minimum wage. The impact of 50% or more of their jobs suddenly increasing from $7.25/hr to $15/hr. though beneficial to the state’s employees, would certainly result in a significant negative impact to the state’s economy for some time to come.

In Michigan, as with many other states, its minimum wage has been above the federal level for many, many years. Effective March 2019, the 2018 amendment to our minimum wage law  increased our state’s minimum wage from $9.25/hr. to $9;45/hr. Michigan’s minimum wage will see an increase every year from now until 2030 where it will top out (unless amended in the meantime) at $12.05/hr.

The CBO report goes on to analyze what the impact of an increase to just $12/hr. by 2025 would be estimating that wages would increase for 5 million workers.  However, to 300,000 U.S. workers would lose their jobs due to an increase of that size.

The report also looked at the impact of a more modest increase to $10/hr. and estimated it would positively impact 1.5 million – 3.5 million workers getting a pay bump if they made under $10/hr. It also found that a minimum rate pay raise of this amount would not result in any significant loss of jobs.

Congress is and will be debating these options. ASE will continue to monitor and report on legislative developments that may impact employment for our members.