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The Biden administration has proposed a Covid relief package that would cost 1.9 trillion dollars. Some politicians are very resistant to the inclusion of a increase in minimum wage to 15.00 dollars per hour.

I understand that there are philosophical/ideological disagreements over the a minimum wage increase, this question is NOT asking about those disagreements. Rather I would like to learn how politicians believe that an increase in the minimum wage would impact the 1.9 trillion cost of the relief proposal.

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  • So you are asking if the volume of 1.9 trillion dollar of that relief bill would change if the minimum wage requirement was removed from it? – Philipp Feb 2 at 13:46
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    @Phillip, has any politician or analyst said that the 1.9 trillion would increase or decrease by "X" amount if the minimum wage provisions were deleted from the proposal. – BobE Feb 2 at 13:52
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It doesn't seem like the volume of that proposal would be any different if that minimum wage requirement was changed or removed.

The reason is that those minimum wages are paid by the employers, not by the government. Even wages for minimum wage employees employed directly or indirectly by the government itself do not factor into the budget of this proposal, because their wages are still part of the operational budgets of their respective departments and not part of the extra budget from this proposal.

The full text of the American Rescue Plan does not seem to be available on the Internet yet, but relying on what Wikipedia has collected on it from various news reports, the only part of it which might be affected by the minimum wage increase is "Funding for 100,000 public health workers for vaccination outreach and contact tracing", but only if the intended wage for those health workers would otherwise be below $15 an hour. And also if that section of the proposal (which isn't public yet) was really saying that 100,000 people should be hired no matter what they cost instead of just setting a fixed budget which should be enough to hire 100,000 people (in which case that budget would be good to hire more than 100,000 people for <$12 an hour).

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Government costs are offset by taxpayer revenue. This 1.9 trillion is no different. Changing the minimum wage will impact taxpayer revenue.

One argument is that higher wages means a larger volume of taxes for that individual. If Americans were earning more, it would mitigate the increased costs by generating more taxes.

The problem is that they wouldn't be earning more despite being paid more. The amount of work a person is capable of doing is finite, while more money might motivate them to perform better under normal circumstances, this loyalty/motivation effect is lost when every job is required to pay at least that amount. At the end of the day, getting paid 100 times as much won't make people produce 100 times more.

Companies in response to the employees accomplishing a similar amount of work but costing twice as much per hour are forced to reduce hours and reduce staff. It would also accelerate the turn towards automation. Unemployed people wouldn't generate taxes. Some large businesses can afford to absorb the cost, some smaller businesses can't. All businesses that are just barely surviving will fail, like they would with any major increase in expense.

Maybe there's a sweet spot where paying more means more revenue overall, but I really doubt it's in the "double" range.

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    Please note that the question is specifically not asking to debate the macroeconomic effects on an increase in minimum wage. It is only asking for the effect on this one bill. – Philipp Feb 2 at 22:42
  • @Philipp No it doesn't. It says no "philosophical/ideological disagreements". The only way to impact of the 1.9 trillion cost would be to increase or decrease the amount of revenue, which minimum wage is directly related to. I made no judgement on whether it's right or wrong to do so, only gave both perspectives on what impacts it could have on the revenue. – gunfulker Feb 2 at 22:47
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    @gunfulker "I would like to learn how politicians believe that an increase in the minimum wage would impact the 1.9 trillion cost of the relief proposal." Does your response answer that question? – BobE Feb 2 at 23:43
  • @BobE Yes, just not for the politicians in favor of the proposal, which is repeatedly shown to be an unwelcome prospective here. – gunfulker Feb 3 at 1:43
  • @gunfulker No, the answer does not answer the question how the minimum wage impacts the cost of the relief proposal. It just goes on a tangent about the macroeconomical consequences of minimum wage, which is outside of the scope of the question. – Philipp Feb 3 at 10:54

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