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CBO: Benefits Outweigh Costs of $15 Minimum Wage

Raising the minimum wage to $15 an hour by 2025 would reduce the number of people in the U.S. living in poverty by 1.3 million. (Pixabay)
Raising the minimum wage to $15 an hour by 2025 would reduce the number of people in the U.S. living in poverty by 1.3 million. (Pixabay)
July 12, 2019

LINCOLN, Neb. – The benefits of raising the federal minimum wage to $15 an hour by 2025 would far outweigh any costs, according to a report released this week by the Congressional Budget Office.

Former U.S. Labor Department chief economist Heidi Shierholz, now a senior economist with the Economic Policy Institute, said the move would raise wages for 27 million low-wage workers, and would increase those workers' family incomes by $22 billion annually.

"Inequality would go down; the number of people living in poverty would go down by 1.3 million," Shierholz explained. "And nearly half of those would be kids, because their parents get a raise."

The last time Nebraska's minimum wage went up was in 2008, from $6.55 to $9 an hour. The state also allows exemptions for a variety of workers, including agricultural workers.

Critics of a proposal introduced this year in the U.S. House to raise the federal wage to $15 an hour by 2024 said workers could lose jobs or see reduced hours, and warned that higher labor costs could be passed along to consumers.

According to Shierholz, most studies – including from the libertarian Cato Institute – have confirmed that raising the minimum wage hasn't resulted in substantial job loss. Most businesses are able to absorb the cost through a reduction in staff turnover, which she says is typically high in the low-wage job market.

"Because people are just more invested in their jobs. That reduces a huge expense for employers," she said. "The cost of someone leaving and replacing a worker can be up to 20 percent of annual wages."

Shierholz thinks businesses also would benefit overall if the wage floor was raised, because low-wage workers tend to spend any additional money on necessities.

She noted that prices at restaurants have gone up by just .6% for every 10% increase in the minimum wage. She added that polls have found people are willing to pay a little more if it means workers get better wages.

Eric Galatas, Public News Service - NE