President Joe Biden’s proposal for increasing the minimum wage rate has triggered mixed reactions from all sectors of the employment industry. In a report published by The Congressional Budget Office (CBO) the proposal of increasing the minimum wage to $15 an hour will cause 1.4 million Americans to lose their jobs over the next 4 years.
The CBO is responsible for employment statistics for every state in the USA and is also a federal agency. After carefully analysing the possible fallout of such an increase the CBO has put on record that such a rise will have large repercussions and that many Americans will lose their jobs as employers will simply be unable to afford their salary.
This is in contrast to Democratic employment advocates who are optimistic about the latest views of the federal government on wage increases and said that the businesses will be able to handle the cost. Adding to the mix, they said that the increased wage will benefit the USA’s economic growth.
Biden in his speech stated that the government will push $1.9 trillion into the economy to boost up various employment schemes and will be committed to achieving these goals. The four-year plan will be successfully implemented in states where workers are paid a wage of $7.25 an hour or less. Notably, in several states, many workers are already being paid a $15 per hour wage.
According to the CBO report, the impact will not be felt during the initial few years but they expect the job losses to hit by 2025. Businesses or employers will be trying to cope with a surge in costs and will end up compensating through pay cuts or layoffs. It has been predicted that the federal budget insufficiency within a span of 10 years will rise by $54 billion. The 2020 financial year shortfall was $3 trillion, confirms the agency.
By 2025 business will face an increase in operational costs and that will impact the goods and services industries operational margins. To counter this business owners will have no choice but to increase the cost of the goods and/or services. The increased costs will impact production and automatically jobs will be put at risk, the report explained. A Goldman Sachs report says a different story. According to them the minimum wage will eradicate poverty and help workers to grow. Thus mixed reactions are coming up from different organizations working on the same objective.