- Higher salaries, but not just for minimum wage workers
- Higher spending for Medicaid, Medicare and ACA subsidies
- Higher prices for goods and services, especially health care related
- Higher federal deficits
- Lower spending on programs such as SNAP
- The number of people in poverty would be reduced by 0.9 million.
These are among the conclusions of a new CBO report on raising the minimum wage. Higher prices, higher demand = inflation. Higher health care costs = inflation. Higher costs for employers including payroll taxes = inflation. Loss of eligibility for SNAP may mean no net gain for MW workers.
So, taken in total, what has been accomplished in the long run for the minimum wage worker? We have a strange way of looking at things. But we will all feel better because we raised the minimum wage.
“If enacted at the end of March 2021, the Raise the Wage Act of 2021 (S. 53, as introduced on January 26, 2021) would raise the federal minimum wage, in annual increments, to $15 per hour by June 2025 and then adjust it to increase at the same rate as median hourly wages. In this report, the Congressional Budget Office estimates the bill’s effects on the federal budget.
- The cumulative budget deficit over the 2021–2031 period would increase by $54 billion. Increases in annual deficits would be smaller before 2025, as the minimum-wage increases were being phased in, than in later years.
- Higher prices for goods and services—stemming from the higher wages of workers paid at or near the minimum wage, such as those providing long-term health care—would contribute to increases in federal spending.
- Changes in employment and in the distribution of income would increase spending for some programs (such as unemployment compensation), reduce spending for others (such as nutrition programs), and boost federal revenues (on net).
Those estimates are consistent with CBO’s conventional approach to estimating the costs of legislation. In particular, they incorporate the assumption that nominal gross domestic product (GDP) would be unchanged. As a result, total income is roughly unchanged. Also, the deficit estimate presented above does not include increases in net outlays for interest on federal debt (as projected under current law) that would stem from the estimated effects of higher interest rates and changes in inflation under the bill. Those interest costs would add $16 billion to the deficit from 2021 to 2031.”
SOURCE: Congressional Budget Office 2-8-21
I don’t know the answer but I’m of the opinion that raising the minimum wage isn’t the answer. In addition to the excellent points already made, keep in mind that inflation (according to many) is a hidden tax and the government would certainly love to be able to pay back their debt (if there’s even any interest in doing so) with cheaper dollars.
Funny how my life changed once I got a college degree and learned a valuable skill. Let’s take the profit out of education so more people can learn decent skills (and let’s get rid of this archaic public school system that essentially teaches our children how to be wage slaves while trapping healthy, energetic young children in a classroom for up to 7 hours a day).
Anyone remember the term “voodoo economics”…seems like it still applies.
Yes, also known as Reaganomics and history has taken the view that it “basically” worked at the time. What is currently proposed is totally the opposite of Reaganomics. The objectives of Reaganomics were:
1. Reduction of inflation through a tightening of the money supply
2. Lowering of taxation on both income and capital gains
3. Reduction of government spending
4. Reduction of regulation
Objectives 3 and 4 weren’t really met but inflation did come down and taxes were cut. Because the economy and the GDP improved, more tax revenue was collected.
Also, “voodoo economics” was a termed coined by George Bush before he became Reagan’s VP.
Well in 2020, the Federal Reserve printed 18% of all current US money to cover government debt. This will most likely be increased in 2021 when the latest stimulus package is passed. The democrats want to increase taxes and increase regulation. Both parties are to blame here for increase in government spending so it is not a Trump or Biden thing. The national debt has been a problem for long time and after the 2020 election Congress suspended the US debt ceiling.
We have supply shortages due to covid-19 including building supplies which is driving up housing prices. We have interest rates that have been too low for too long creating bubbles such as in the housing industry again while forcing people to actually “play” in the stock market to get any kind of earnings. We have the federal government just printing money. Democrats are promising more regulations. A minimum wage that will automatically increase (if passed). If you think that all other wages will not have to increase you are wrong. This will cause increase in goods and services and loss of jobs again to cheaper overseas labor markets.
Haven’t even address covid-19 related costs and overall healthcare costs because I don’t think anybody has any idea what those costs really are or where they are going. This is before any future congressional action.
Inflation will come back hard like in the late 1970’s due to the devaluing of the dollar by increasing the money supply (printing more money). Also, once everybody gets back to work, the supply and demand for goods will be out of whack even more and will start the prices raising again. Hyperinflation might occur like in other socialist countries have experienced if the democratic socialist get their way. Life will not be looking good in 5-10 years.
People don’t believe me that in 1981, mortgage rates were around 14% and new car loans were 18%. It is going to totally destroy families finances when they go to replace their cars in a few years and have to get a 5% or 7% car loan instead of 0%. Then they will be demanding even higher wages which will make things worse and more jobs losses. Housing prices will crash if people have to start paying 10% mortgages again instead of 2% to 4%. (I was so happy to get a cheap 10% mortgage in 1987).
I am not against raising the minimum wage. But $15 is not it. I think that the market has already set the minimum wage. People keep working these low paying jobs so that is what the labor supply has dictated.
There has been no inflation above the minimal 2%, yet you issue this clarion call that inflationary doom is just around the corner. Nay, not just inflation, but HYPERinflation. Isn’t this slightly on the hysterical side?
Hyperinflation has two main causes. Most hyperinflations have been caused by government budget deficits financed by an increase in the money supply (printing money) and demand-pull inflation. Prices rise due to a imbalance of supply and demand (regular inflation). When normal inflation occurs and the value of the money decreases, hyperinflation is the result.
Our government is printing money. It has increase the amount of money that the has by 18% in a single year. As far as I am concern, the value of my money dropped by 18% in 2020. Maybe this is one reason why the world’s oil sales is moving away from being sold in US dollars.
The economy runs in cycles. There will be good times and there will be bad times. Inflation will happen just as sure as another recession or depression will happen again. The question is when?
Looking at the disfunction in Washington and how it has grown worse over the last several decades, the size of the national debt, why would anybody believe that inflation will not happen? As far as hyperinflation goes, we have planted the seeds. Will Washington fix our problems or just print more money to meet all the promises the politicians of both parties have made? Free everything for everybody.
“why would anybody believe that inflation will not happen?”
I said why. Despite recent increases in the debt, there has little inflation. Didn’t you read my post?
See “Why increasing the money supply does not always cause inflation” in https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwi557D1vu3uAhWtIjQIHQccAcQQFjAHegQIBhAC&url=https%3A%2F%2Fwww.economicshelp.org%2Fblog%2F111%2Finflation%2Fmoney-supply-inflation%2F&usg=AOvVaw1O_5Fj81YMJvWYvk2jyeux
Yes I read your posts.
To quote your own post; See “Why increasing the money supply does not always cause inflation” would imply that increasing the money supply sometimes does cause inflation. Also the article that you referenced has several points that we are head toward inflation. The question is will it be hyperinflation? So what happen in other countries that printed almost 1/5th of all their currency in a single year? Your article doesn’t reference that at all.
Less review. Excessive high government debt has resulted in the government printing 18% more currency. We have a negative GDP for 2020 with interruptions in the supply chain causing shortages. Since people are given free money, they don’t mind paying more for what they need or want. Let not forget about the push for $15/hr minimum wage that will also drive prices up. People are not saving money in banks because they get almost zero interest which limits some control of the central bank to control the money supply.
Will it happen tomorrow? No. Can the Feds, who printed all this extra money, raise interest rates fast enough to slow inflation when it starts? We will see in a few years.
As far and economic indicators, they are lagging indicators. I read yesterday that building supplies prices have gone up, mostly due to supply issues from covid. I can confirmed that a 2×4 has doubled in price after a trip to Home Depot yesterday. I can’t find simple duplex electrical outlet boxes and when I do, I’ll have to pay any price for them. Some types of plywood is now costing 4x as much. I know that our weekly food shopping costs has also gone up. Prices have gone up but maybe not in the basket that is used to calculate the CPI but they will be affected sooner or later.