Let the bartering begin.
President-elect Joe Biden’s newly revealed effort to lift the minimum wage to $15 an hour is sure to face stiff resistance among Republicans and many in the business community. But some economists say it wouldn’t be too harmful to the economy (think lost jobs) as higher spending among consumers helps offset the burden on businesses paying out the higher wages.
“I mean generally, I support higher minimum wages but I have had reservations that you could have them be too high,” veteran economist and founder of the Center for Economic and Policy Research Dean Baker said on Yahoo Finance Live.
Continued Baker, “We have seen big increases in the minimum wage in New York, California and a number of other states and some cities like Seattle, and really no negative impacts on unemployment or employment. Now that doesn’t mean that there is not going to be some businesses hurt or some that will go out of business, that happens. But the question is, what’s the net effect? And all the evidence is that the increase we are talking about that should not have negative impacts economy-wide.”
The existing federal minimum wage is $7.25 an hour. It hasn’t been raised since 2009 despite across the board inflation in things like rent payments and medical costs.
But Biden swung the door wide open on the minimum wage debate in a Thursday evening speech to the nation detailing a new $1.9 trillion stimulus plan designed to fight the COVID-19 pandemic.
“No one working 40 hours a week should live below the poverty line,” Biden said. “That’s what it means, if you work for less than $15 an hour and work 40 hours a week, you are living in poverty.”
To be sure, Biden is hoping he could ride the wave of those states passing a $15 an hour minimum wage legislation to enact it at the federal level as well.
In November 2020, Florida — a state Biden referenced in his speech — voters approved a ballot measure to gradually lift the minimum wage to $15 by 2026. The lowest paid workers in the state now earn $8.65 an hour, up from $8.56 an hour in 2020. It will move to $10 an hour on Sept. 30.
A total of 20 states raised their minimum wages on Jan. 1 as they march to the $15 an hour mark, Yahoo Finance Ben Werschkul writes.
Those not in Baker’s camp on minimum wage hikes are often quick to point out the potential negative impact to job creation. Indeed there is a good deal of research to fuel that view.
The CBO recently estimated that a $15 an hour federal minimum wage by 2025 would lead to 1.3 million people becoming jobless. There is a 66% chance that the change in employment would be between zero and a decrease of 3.7 million workers, the CBO found. The upshot: the CBO found a $15 an hour minimum wage would boost the wages of 17 million workers.
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