Budget & Tax
Biden’s minimum-wage hike could harm Oklahoma economy
February 11, 2021
As Oklahoma’s economy continues to recover from the events of 2020, President Joe Biden’s proposed minimum-wage increase would put Oklahoma’s long-term economic outlook on shaky ground. That’s one reason OCPA has written to members of Congress asking them to oppose Biden’s proposal.
The proposal would raise the minimum wage to $15 an hour by 2025. This would more than double the current federal minimum wage of $7.25 (which is also the current minimum wage rate for Oklahoma).
Recent research by American Enterprise Institute economist Paul Kupiec shows this wage increase could affect Oklahoma more than many other states. Using Bureau of Labor Statistics data, Kupiec maps out which states would face a greater impact on labor costs if the minimum wage doubled. Oklahoma is in the top 10 in this measure. Other low-cost-of-living states, such as Missouri, Louisiana, and Mississippi, are also in the top 10. It is no surprise that low-cost states would see a greater impact than higher-cost states such as New York, California, or Oregon.
Another analysis by the Congressional Budget Office found that the proposed policy could cost 1.4 million Americans their jobs over the next four years. It would also increase prices and widen the ever-growing federal deficit, due to decreasing economic output. These rising prices and labor costs would especially hurt Oklahoma, which enjoys a comparative advantage thanks to its low cost of living. Entrepreneurs may be less inclined to choose Oklahoma if it can no longer offer substantial benefits in lower labor costs and prices.
At a time when Oklahoma needs to diversify its economy, a lack of new businesses could have serious repercussions. An increase in the minimum wage, while potentially costing current jobs, could also harm future job creation.
State lawmakers may not have a say in what the federal government does, but they can ensure that Oklahoma is in the best position possible if this policy change is made—specifically, by rejecting tax increases. Any state tax increases would only exacerbate Oklahoma’s economic problems and lead to a further deterioration of Oklahoma’s economic future.
(Image: Joe Biden)