Unemployment, Inflation, and Automation: The Truth About The $15 Minimum Wage

Before signing an executive order kick-starting the process to require that “everyone working for the federal government get a minimum wage of $15 an hour,” Biden said that we were in a “national emergency.”

“We need to act like we’re in a national emergency. So we’ve got to move with everything we got,” Biden said in a speech.

“If we act now, our economy will be stronger in both the short and long run. That’s what economists both left, right and center are telling us.”

In an “Executive Order on Protecting the Federal Workforce,” signed on January 22, Biden described career civil servants as “the backbone of the Federal workforce,” and laid the groundwork for a federal minimum wage of $15.

In Section 5 of the order, titled “Progress Toward a Living Wage for Federal Employees,” Biden directs the Director of the Office of Personnel Management to “provide a report to the President with recommendations to promote a $15/hour minimum wage for Federal employees.” 

In the pursuit of a broader federally-mandated minimum wage of $15 per hour, Biden included such a proposal as part of his $1.9 trillion economic stimulus package, saying “if you work for less than $15 an hour and work 40 hours a week, you’re living in poverty.” 

While Biden has expressed some doubt that the relief proposal will be a successful vehicle for this policy, he has also said that he was prepared “on a separate negotiation on minimum wage, to work my way up,” having campaigned on raising the minimum wage prior to winning the election.

Multiple high profile Democrats have spoken enthusiastically in favor of raising the minimum wage to $15 per hour. Rep. Ilhan Omar (D-MI) claimed that raising the minimum wage would lift hundreds of thousands of Americans out of poverty.

Raising the minimum wage to $15 would lift 900,000 out of poverty.

It’s time!

— Ilhan Omar (@IlhanMN) February 8, 2021

Rep. Alexandria Ocasio-Cortez said that we need “more than $15,” calling to “push for more equitable pay.”

House Speaker Nancy Pelosi said that they were “proud” of the bill which included a $15 minimum wage, and that “27 million people will get a raise.”

Unfortunately, the reality of minimum wage increases is far from the economic utopia being presented by Democrats, and is closer to the outcome of Biden’s other job-killing executive orders and policies.

In January, Fox Business reported the findings of the Congressional Budget Committee, who found that Biden’s $15 minimum wage proposals would “reduce business income and raise prices,” as well as destroying countless jobs.

“Biden’s effort to raise the federal minimum wage from $7.25 to $15 per hour is estimated to kill as many as 3.7 million jobs, according to a recent nonpartisan analysis by the Congressional Budget Office,” Fox Business reported. “Based on the CBO’s median estimate, 1.3 million workers who would otherwise be employed would be jobless in an average week in 2025, an 0.8% reduction. However, the CBO also noted that a federal minimum wage of $15 per hour would increase the wages of 17 million workers in an average week in 2025.”

In July 2019, the CBO also forecast that increasing the minimum wage to $15 per hour would “Reduce business income and raise prices as higher labor costs were absorbed by business owners and then passed on to consumers,” and “Reduce the nation’s output slightly through the reduction in employment and a corresponding decline in the nation’s stock of capital (such as buildings, machines, and technologies).”

In June 2017, when a team of economists studied the effects on employment when the city of Seattle moved to increase its minimum wage — hitting a $13 minimum in 2016 — they found that this “reduced hours worked in low-wage jobs by around 9 percent.” Later research in October 2018 found that “less-experienced workers saw no significant change to weekly pay.”

Just this week, the Congressional Budget Office said that “Joe Biden’s plan to raise the minimum wage to $15 per hour by 2025 would cut employment by 1.4 million jobs that year and increase the budget deficit by $54 billion over the next 10 years.” While the “non-partisan legislative budget referee agency” claimed that the minimum wage increase would “lift 900,000 Americans out of poverty in 2025,” they acknowledged that this would be somewhat offset by 1.4 million fewer workers employed “as some companies will choose to invest more in technology or automation.”

“Young, less-educated people would account for a disproportionate share of those reductions in employment,” the CBO said.

In addition, according to analysis carried out by Rachel Greszler — an economics research fellow at the Heritage Foundation — a $15 minimum wage would raise the cost of child care by an average of 21% across the United States, equating to $3,728 per year for a family with two children.

“With childcare consuming even more of family budgets — 40 percent or more of the median household incomes in a lot of states — many families could be priced out of the childcare market completely,” Greszler wrote. “In turn, the unintended consequences of a $15 minimum wage could force some parents to give up their jobs and live on lower household incomes, while causing others — particularly single parents — to turn to non-licensed, typically illegal, childcare.”

The economic reality being intentionally ignored or dismissed by Democrats is that simply raising the minimum wage does not guarantee that every current worker will therefore receive a higher income. As summarized by Thomas Sowell, “making it illegal to pay less than a given amount does not make a worker’s productivity worth that amount — and if it is not, that worker is unlikely to be employed.”

The claim made by Democrats assumes both that every one of these lower-paying jobs is safe from replacement or removal, and that companies are financially able to pay the additional wage.

These are obviously untrue. Earlier this week, the supermarket chain Kroger announced that they were “about to test its first store that offers only self-service checkout lanes using enhanced capabilities.” Presumably, if successful, this would result in the removal of the minimum wage jobs of checkout workers. 

Larger corporations, such as Amazon, are also advocating for a federally-mandated $15 minimum wage. Many argue that the goal here is to place a further financial disadvantage upon the small businesses already struggling to compete.

Not only that, there is the mathematical fact that $15 does not hold the same value across the United States. Writing for the Daily Wire, Rachel Greszler noted that “costs of living vary significantly across the United States.”

“The federal government recognizes these differences (albeit imperfectly) through locality-based adjustments to the General Schedule pay scale which increases some workers’ pay by as much as 40% due to higher costs-of-living,” Greszler continued.

“But lawmakers pushing a $15 nationwide minimum wage are failing to recognize these differences, and while no city or state can escape the unintended consequences of a $15 minimum wage, some areas will be especially hard-hit.” 

“In Mississippi, for example, the median wage is $15 per hour. That means that half of all workers in Mississippi earn less than $15 per hour, and half earn more. Imposing a $15 minimum wage on Mississippi would be like imposing a $21.24 minimum wage on California, a $24.14 minimum wage on Massachusetts, and a whopping $35.74 minimum wage on DC.”

In a piece for the Daily Signal, Greszler summarized “6 Ways a New Report Devastates the $15 Minimum Wage:”

1. It would be a job-killer.
2. It would create a survival-of-the-fittest labor market.
3. It would expedite the pace of automation.
4. It would drive up prices.
5. It would shrink the economy, and shrink family incomes.
6. It would drive up deficits, inflation, and interest rates.

As many in the country already struggle with the results of government mandated lockdowns in the face of the COVID-19 pandemic, none of these likely outcomes should be a point of celebration.

Ian Haworth is an Editor and Writer for The Daily Wire. Follow him on Twitter at @ighaworth.

The views expressed in this piece are the author’s own and do not necessarily represent those of The Daily Wire.

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