By Andy Puzder & Jon Hartley
Tuesday, February 09, 2021
The Biden administration’s $1.9 trillion COVID-19 relief
proposal included a handful of partisan measures completely unrelated to
pandemic relief, including increasing the federal minimum wage to $15 an hour
from the current level of $7.25 an hour. Lacking sufficient bipartisan support
to meet the 60-vote majority required under the Senate’s filibuster rules,
Democrats are using a legislative process known as budget reconciliation to
pass their bill. Reconciliation requires a simple majority vote for passage but
is limited to bills on spending, revenue, and the federal-debt limit. A
minimum-wage bill clearly does not qualify.
The problem for Democrats is the Senate’s “Byrd rule,”
under which the nonpartisan Senate parliamentarian is authorized to strip
“extraneous” provisions out of such legislation. Provisions are extraneous if
they fail to produce a change in outlays or revenues or produce a change that
is “is merely incidental.”
President Biden recently conceded that a minimum-wage
increase is an unlikely candidate for a budget reconciliation. In a
pre-recorded interview on Friday with CBS host Norah O’Donnell, Biden stated
that he didn’t believe the minimum-wage hike was “going to survive” as part of
the bill. You could almost hear America’s struggling small businesses emit a
sigh of relief.
Senate Democrats tacitly acknowledged the problem on
Friday when they used reconciliation to pass a COVID-19 relief bill that did
not include the $15 minimum-wage hike. However, the vote was nonbinding and
such a provision could be added to subsequent versions of the bill.
Never fearful of plowing sand, even with an abundance of
serious problems to address, the newly appointed chair of the Senate Budget
Committee, Socialist senator Bernie Sanders (I., Vt.), continues to push for
the wage hike. On Sunday, Sanders told CNN’s Jake Tapper, “We have a room full
of lawyers working as hard as we can to make the case to the parliamentarian
that, in fact, raising the minimum wage will have significant budget
implications and, in fact, should be consistent with reconciliation rules.”
In his attempt to overcome the Byrd rule, Sanders has
cited new studies from two sources with a history of highly partisan research
in support of minimum-wage hikes. Authored by the Economic
Policy Institute and Berkeley
economist Michael Reich these studies claim that a $15 federal minimum wage
would positively impact the federal budget by tens of billions of dollars per
year through increased tax revenue and reduced costs for public-assistance
programs. Reich claims hiking the minimum wage to $15 an hour by 2025 would
positively impact the federal budget to the tune of $65.4 billion a year.
But would that really happen? Clearly not.
On Monday, the nonpartisan Congressional Budget Office
issued a report
stating that, should Sanders’ $15 minimum-wage bill become law, “the cumulative
budget deficit over the 2021–2031 period would increase by $54 billion.” That
sure doesn’t sound like a budget windfall.
In addition, the CBO’s average estimate was that, in the
year the minimum wage hit $15, “the effects on workers and their families would
include” a reduction of 1.4 million jobs. That’s a lot of jobs for an
administration that claims it will focus on “getting back to full employment,
as quickly as possible” because it “will make a major difference in the lives
of tens of millions of people, particularly those most at risk of being left
behind,” according to a White House blog post by Council of Economic Advisers
members Jared Bernstein and Heather Boushey.
So how would a $15 minimum wage impact those people “most
at risk of being left behind”? According to the CBO’s report, “young, less
educated people would account for a disproportionate share of those reductions
in employment.” That’s not a surprise.
In January, economists David Neumark and Peter Shirley
issued a study
on the employment impact of minimum-wage increases. It assembled the “entire
set of published studies” and “identified the core estimates that support the
conclusions from each study.” It found “a clear preponderance” in the
literature that increasing the minimum wage negatively affects employment,
particularly with respect to “teens and young adults as well as the less-educated.”
Sanders’ claim that a $15 minimum wage would reduce
budget deficits is based on partisan research, at best grossly misleading and
at worst simply wrong. Including such a provision in a budget-reconciliation
bill would make a mockery of the Byrd rule and open up the process to
significant future abuse. It would also seriously reduce job opportunities for
the people who need them most.
Perhaps Democrats might consider spending more time on
the negative impact their proposed federal minimum-wage hike would have on the
teens, young adults, and the less-educated that the CBO and NBER studies found
are most adversely affected by increasing the minimum wage — particularly those
in poorer parts of the country. Let’s not forget we are recovering from a
recession that disproportionately hurt businesses with hourly workers. That’s
one reason we need a COVID-19 relief bill in the first place.
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