The authors of a new study on the impact of the $15 federal minimum wage on child care costs say that while the move will raise the incomes of some low-wage workers, it will increase the cost of child care across the country by as much as 43 percent in some states.
Rachel Greszler, an economic, budget and entitlement fellow at the Heritage Foundation conservative think tank, said in an interview with NTDTV that while the federal minimum wage increase would benefit some, “it would actually come back and end up hurting the very groups that these lawmakers want to help the most “
“I estimate that across the United States, the cost (of child care) would have to increase by an average of 21 percent. That’s an additional $3,728 increase in cost for a Family with two children.” Gressler said.
“But the cost increase would be even higher,” she added, “with 10 states seeing a 30 percent or more increase in costs, with Mississippi alone seeing a 43 percent increase and several states, such as Iowa and Indiana, seeing an increase of more than $6,000 in child care costs for two children. ” She said.
The study, authored by Gressler, provides the annual impact of a $15 minimum wage on the cost of child care in all states. The smallest impacts are in Washington (+1,131), Massachusetts (+1,608) and Vermont (+1,269). And the cost for families with two children would increase by more than $5,000 in some states – Kansas (+$5,636), Louisiana (+$5,487), Oklahoma (+$5,602), Wisconsin (+$5,227), Georgia (+$5,222) and Nevada (+$5,019).
In addition to the impact on childcare costs, Gressler said another effect of the federal minimum wage increase is that it will put some people out of work altogether.
“It’s a pretty bleak outlook for them,” she said, “and the reality is that at $15 an hour, that equates to $36,000 a year in costs to employers. There are a lot of people, especially when they first start out in the workforce, who can’t generate that much value, at least not yet. They need some experience and additional Education. And what we’re doing here is basically taking certain people out of the labor market.”
She cited projections from the Congressional Budget Office estimating that between 1 million and 3 million people could lose their jobs if the federal minimum wage is raised to $15 an hour.
“In the short term, they would be out of work and looking for work. In the long term, they will drop out of the workforce, and some of them may turn to disability insurance programs. Some of them may have to move in with friends or family because they don’t have any options.” Gressler said.
In the report, she said there are better ways than the federal minimum wage requirement to help workers achieve higher incomes without unintended consequences for others, including increasing educational opportunities and reducing barriers for businesses to invest in workers. She also advocates relaxing regulations on child care to give Parents more flexibility in how they spend available public child care dollars.
The study came out just as the House Education and Labor Committee approved Wednesday (Feb. 10) an increase in the federal minimum wage to $15 an hour over five years. The measure will appear in the Epidemic relief bill that the House is forwarding to the Senate for consideration.
House Speaker Nancy Pelosi (D-Calif.) told reporters when asked if the House bill would include a minimum wage increase, “Yes, it would. We’re very proud of that.”
However, the measure still faces challenges in passing the Senate, which has a more moderate stance.
Raising the minimum wage faces opposition from Republicans, and some Democrats are wary of it, saying it would hurt small businesses, especially during a viral pandemic.
In an interview with The Hill in early February, Sen. Joe Manchin, a federal Democrat, said when asked if he would support a $15 minimum wage, “No, I don’t, I support something that is responsible and reasonable.”
Republican Sen. Chuck Grassley (R-Iowa) said last month that Biden‘s $15-an-hour minimum would freeze hiring and expansion plans for small businesses already struggling on the line and, at worst, would completely “destroy small businesses that are on their last legs.”
Economists have been hotly debating the issue of raising the minimum wage for years, with supporters arguing that higher wages would boost purchasing power and increased spending could boost the economy, while opponents argue that it would hurt businesses and lead to higher unemployment.