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1 The Budgetary Effects of the Raise the Wage Act of 2021 1 (February 8, 2021)

handle is hein.congrec/cbobeff0001 and id is 1 raw text is: Congressional Budget Office Nonpartisan Analysis for the US. Congress The Budgetary Effects of the Raise the Wage Act of 2021 FEBRUARY 2021 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. The estimates in this report are based on CBO's most recent economic forecast, which was released earlier this month. CBO estimated the budgetary effects using techniques that it has developed over the past two years. Those estimates are based on CBO's estimates of the bill's effects on the economic behavior of individuals and firms-which in this report refers to actions that change relative prices, the distribution of income, employment, and other economic factors. Underlying the budgetary estimates are CBO's projections of how pay would change for people directly or potentially affected by an increase in the minimum wage-that is, people who would otherwise have been paid hourly wages that were less than the proposed new minimum or slightly above it-and how changes in pay would affect the number of people employed. From 2021 to 2031, the cumulative pay of affected people would increase, on net, by $333 billion-an increased labor cost for firms considerably larger than the net effect on the budget deficit during that period. Notes: Numbers in the text and tables may not add up to totals because of rounding. Budgetary effects are reported for federal fiscal years, which run from October 1 to September 30 and are designated by the calendar year in which they end. Otherwise, the years referred to are calendar years.

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