Consumers with shopping bags Anincrease in the federal minimumn wage could lead to higher spendingby those who would have more money to spend, higher customerdemand, more business activity and job growth. (Photo:Shutterstock)

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The Congressional Budget Office's report on the effects an increase in the minimum wage couldhave on employment and family income highlights a number ofbenefits, although it's pessimistic about the number of people thatcould find themselves out of work should the wage rise to $15 beadopted.

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Currently the federal minimum wage stands at $7.25 per hour formost workers. In its evaluation of a 6-step increase to $15 by2025, the report says that 17 million people who would otherwiseearn less than $15 per hour would see an increase, while another 10million who already make a little more than $15 could see their ownwages rise as well.

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Related: Will minimum wage hikes hinder jobgrowth?

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Despite recent research indicating that “previous, modestincreases in the minimum wage had little or no negative effects onthe employment of low-wage workers,” says a letter signed by more than 100economists supporting an increase in the minimum wage to $15, theCBO theorizes that 1.3 million people could end up out of ajob—although it also concedes that the number of people whoseannual income is below the poverty level would fall by 1.3million.

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The economists' letter, issued by the Economic Policy Institute,highlights the benefits to the economy that could accrue from a$15-per-hour minimum wage: higher spending by those who would havemore money to spend, higher customer demand, more business activityand job growth.

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CBO Chart on minimum wage
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According to CBO, business income would fall and prices wouldrise, but the higher costs attached to the wage increase wouldmostly fall on “families well above the poverty line.” It adds thatit “estimates that families whose income would be below the povertythreshold under current law would receive an additional $8 billionin real family income in 2025 under this option. That would amountto a 5.3 percent increase in income, on average, for suchfamilies.”

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The report adds that as of this year, 29 states as well asWashington, D.C. all have minimum wages higher than the currentfederal minimum, with many of them having indexed their minimumwages to inflation—something the federal minimum wage currentlydoes not have.

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The CBO report also looked at lesser increases of $12 and $10,concluding that the effects on the economy and on workers would beless dramatic both in benefit and in potential problems, with the$10 option having “negligible effects on the number of people inpoverty.”

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Marlene Satter

Marlene Y. Satter has worked in and written about the financial industry for decades.