Trending Topics

CBO Report: Minimum Wage Increase Would Lift Many Americans From Poverty, But Could Kill Jobs

strike-CST-042513-07.JPGRaising the minimum wage would be a great benefit for people in poverty, but could also lead to significant job loss, according to a new report by the influential Congressional Budget Office that was immediately hailed by both liberals and conservatives.

The report added fuel to the continuing debate over the wisdom of a wage hike.

If the minimum wage were raised to $10.10 an hour, which is where congressional Democrats and President Obama would like to see it go, it could reduce total employment by 500,000 workers by the second half of 2016. But the CBO  said it would also lift 900,000 families out of poverty and increase the average weekly incomes of 16.5 million low-wage workers.

In the report, the CBO did acknowledge that its calculation is an estimate, which means actual job losses could range from “very slight” to as many as 1 million positions.

“The increase in the minimum wage would have two principal effects on low-wage workers,” the CBO said in the report. “The large majority would have higher wages and family income, but a much smaller group would be jobless and have much lower family income.”

While Democrats seized on the numbers lifted out of poverty as a reason to embrace the proposal, the White House took the unusual step of disputing some of the CBO analysis.

In a conference call with reporters, Jason Furman, chairman of the White House’s Council of Economic Advisers, said that the office’s estimate of the potential lost jobs might be too high, according to the New York Times, which quoted Furman as saying that a finding of no effect on jobs would be a “perfectly reasonable estimate.”

The analysis does not reflect “the consensus view of economists,” he said. “Sometimes, you have to have respectful disagreement.”

Lawrence Katz, an economist from Harvard, told the Times that the budget office had used “a lot of off-the-shelf estimates” for the jobs effect. He said if the CBO had focused on findings from higher-quality studies, it would have found a smaller or negligible impact on total employment.

To conservatives, however, the potential loss of 500,000 jobs was enough for them to feel vindicated by the report.

“Raising the minimum wage could destroy as many as one million jobs, a devastating blow to the very people that need help most in this economy,” said Sen. Mitch McConnell of Kentucky, the minority leader, according to the Times. “If and when Democrats try to push this irresponsible proposal, they should be prepared to explain why up to a million Americans should be kept from having a job.”

Brad Woodhouse, the president of Americans United for Change, a liberal advocacy group, had this sarcastic observation: “I haven’t seen Republicans this excited about something that bucked the trend in their favor since the last poll showing Mitt Romney was about to be elected president. But sorry to rain on their parade—one report does not a trend make.”

Jared Bernstein, a senior fellow at the left-leaning Center on Budget Policy and Priorities, told the Washington Post that “even if they’re right, we’re still talking about a policy that benefits about 98 percent of affected workers.”

The American public is strongly in favor of a minimum wage increase: A Washington Post-ABC News poll in December found that two-thirds of Americans support a higher minimum wage. But when asked about what wage they prefer, the predominant preference was short of the Democratic proposal of $10.10 per hour. The average among the 897 respondents was $9.47—Democrats wanted $10.06 an hour, Republicans were at $8.57, and independents at $9.52. But 7 out of 10 still supported a hike to $10.10.

“The CBO made it absolutely clear: raising the minimum wage would lift almost one million Americans out of poverty, increase the pay of low-income workers by $31 billion and help build an economy that works for everyone,” said Representative Nancy Pelosi of California, the minority leader.

Back to top