Joe Biden
Biden minimum wage plan might hike unemployment by 1.4 mln, budget deficit by $54Bln: CBO
Washington/Sputnik: President Joe’s Biden plan to virtually double the US minimum wage to $15 per hour by June 2025 would raise unemployment by an estimated 1.4 million and the budget deficit by $54 billion in the decade between 2021 and 2031, the bipartisan Congressional Budget Office (CBO) said on Monday.
“Employment would be reduced by 1.4 million workers, or 0.9 percent, according to CBO’s average estimate,” the agency said in a report that pointed out that the number taken out of poverty will only be around 900,000. “The cumulative budget deficit over the 2021–2031 period would increase by $54 billion.”
The US budget deficit stands at around $573 billion, after having risen 61 percent in the first three months of fiscal 2021, the Treasury Department said in its monthly balance sheet reported on January 12. The minimum wage itself is at $7.25 per hour.
Rival Republican lawmakers to Biden’s Democratic Party have pushed back against his attempts to include the minimum wage plan as part of a $1.9 trillion coronavirus relief bill he seeks to pass in Congress.
Business owners and captains of industry have also argued that such a hike in minimum wages would put a damper on the economy and ultimately defeat efforts to reach full employment when the country recovers from the impact of COVID-19.
While those arguments appeared strengthened by the CBO’s report, the agency also said there were other economic models that presented “conflicting conclusions” to its thesis.
“Some researchers have suggested that during and after periods of high unemployment, a larger-than-average share of firms open or go out of business, and employment might be more responsive to a higher minimum wage under such conditions,” the CBO said. “But it is also possible that many of the workers who in normal times would be projected to lose their jobs because of a higher minimum wage, such as restaurant workers, have already lost their jobs because of the pandemic. In that case, the bill’s effect on employment could be weaker.”
The United States lost more than 21 million jobs between March and April, at the height of business lockdowns forced by the coronavirus. A rebound of 2.5 million jobs was logged in May and 4.8 million in June, before the recovery began slowing. For both September and October, less than 700,000 jobs were added each month. In November, there were just 245,000 additions while December saw a loss of 140,000 jobs - the first such decline since April - before a growth of 49,000 in January.
As for the economy, the Commerce Department estimated that gross domestic product shrank 3.5 percent in 2020, after a 2.2 percent growth in 2019.
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