Minimum wage report puts Democrats on defensive

Nonpartisan budget analysts say a boost of the minimum wage could cost a half-million jobs
Associated Press
Feb 20, 2014

A report by Congress' nonpartisan budget analysts seems to have thrown Democrats onto the defensive after it concluded that the party's drive to boost the federal minimum wage could cost a half-million jobs by 2016.

A Congressional Budget Office report released Tuesday concluded that a gradual increase to $10.10 hourly by that year — which is what President Barack Obama and congressional Democrats are seeking — would increase pay for more than 16.5 million people, mostly those earning low wages. It also would lift 900,000 people over the federal poverty threshold, the study said.

Democrats hailed those findings. But in a congressional election year in which the slow-recovering economy remains a paramount issue, Democrats from the White House to Capitol Hill contested another of the report's conclusions: that the increase would reduce jobs in 2016 by roughly 500,000, or 0.3 percent.

That figure was the midpoint of a range of job losses the budget office estimated at somewhere from negligible to 1 million eliminated positions. And it was an unpleasant number for Democrats, who plan to make their long-shot effort to raise the minimum wage this campaign year a centerpiece of their focus on correcting income inequity between haves and have-nots.

Jason Furman, chairman of the White House's Council of Economic Advisers, and council member Betsey Stevenson referred in a blog post to a statement by more than 600 economists who cited recent academic findings that "increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market."

"There's some respectful disagreement on the emphasis and certainty around that magnitude of employment loss," Furman told reporters of the CBO estimates. He added, "Zero is a perfectly reasonable estimate of the impact of the minimum wage on employment" based on research by other economists.

Among those echoing Furman were Sen. Tom Harkin, D-Iowa, author of the minimum wage bill the Senate plans to debate next month. His measure would boost today's $7.25 standard in three steps to $10.10 by 2016, with annual increases reflecting inflation after that.

Citing "the newest economic research using the most sophisticated methodologies," Harkin said, "since the first minimum wage was enacted more than 75 years ago, opponents have argued that a wage floor would cause job loss. But this is a myth."

Republicans, who long have solidly opposed a minimum wage boost as a job killer, wasted no time in using the budget office report to buttress their case.

"Today's CBO report shows that raising the minimum wage could destroy as many as 1 million jobs, a devastating blow to the very people that need help most in this economy," Senate Minority Leader Mitch McConnell, R-Ky., said.

"With unemployment Americans' top concern, our focus should be creating — not destroying — jobs for those who need them most," said Brendan Buck, spokesman for House Speaker John Boehner, R-Ohio.

The study also examined the impact of boosting the minimum wage to just $9 hourly by 2016, similar to what Obama embraced a year ago, and leaving it at that level afterward. That lesser increase would have smaller effects — about 100,000 fewer jobs, higher wages for 7.6 million workers and 300,000 people lifted out of poverty.

Without any changes in the minimum wage, about 45 million Americans are expected to live below the poverty line in 2016. The budget office estimates that the poverty level that year would be $24,100 for a family of four, less for smaller families.

The report said an increase to $10.10 would add $31 billion to the earnings of low-wage workers.

But it noted that only 19 percent of that increase would go to families earning less than the poverty threshold, while 29 percent would go to families earning more than triple the poverty level. That is because many low-wage earners are not in low-wage families.

In addition, income would decrease by $17 billion for families earning at least six times the poverty level because that group would be affected most by lost business income and price increases.

The report said that besides boosting wages for people earning less than $10.10 hourly, a minimum wage boost to $10.10 would help some people making more than that amount as bosses adjust their pay scales upward.

A minimum wage boost can cost jobs because employers can compensate for their higher wage costs by raising prices. That can prompt consumers to purchase fewer goods and services and, in turn, encourage companies to hire fewer workers, the report said.

A minimum wage increase also encourages some businesses to trim the number of low-paid workers. But the study said the effect can be mixed.

It noted that some companies would react by getting higher productivity from their workers, and some would see savings because increased wages could reduce turnover. Other companies could benefit as increased overall spending on goods and services by low-wage workers boosts demand for their products.

Some workers' incomes would grow as their earnings increase, causing them to pay more taxes. But for others, income would fall — reducing their tax burden — and still others would begin collecting unemployment insurance.

As a result, the budget office said a higher minimum wage would have a negligible impact on federal budget deficits.

 

Comments

From the Grave

If we would do away with the EPA and OSHA, we could get back to making some money in this country.

pntbutterandjelly

Oh yeah. If we did away will all regulatory requirements we would all be zillionaires with missing limbs, zero wildlife infringment and irradiated swimming pools filled with gold! Oh I can see the good life now!(idiot)

SamAdams

There's another factor not mentioned here. Raising the minimum wage also means price increases. You can pretend all day long to "lift people out of poverty," but when their buying power doesn't change appreciably, the reality is that it makes no difference in their status.

This is really typical of the Obama administration, but it's also been used by others. They calculate the effects of a future raise based on today's dollars which is inaccurate at best.

Minimum wage increases are a lot like Communism. There are people who think those things SOUND good, but history has proved -- without exception -- that things just don't work that way in the real world.

Contango

Re: "price increases,"

See: Price-wage spiral.

http://en.wikipedia.org/wiki/Pri...

SamAdams

* BOOM! *

Peninsula Pundit

Obama,Obama,Obama.
I've never seen one person have so much unilateral power ascribed to him by his opponents like they do for this president.
It's really a backhanded compliment.
They are mad at him for not fixing everything, everywhere, all the time.
If he tries to move forward, they say we should stop.
If he wants to proceed cautiously, they're mad because we aren't moving forward.

If it keeps up like this, they'll be complaining they haven't seen him leap a building in a single bound yet.

SamAdams

I don't expect Obama -- or any other president -- to fix things. I expect him to stop making things WORSE!

Peninsula Pundit

Maybe you shouldn't have crossed over in the Dem primary to vote against Hilary!

Dr. Information

Its not America's fault Obama promised everyone the world and fell flat on his face.

deertracker

IF you worked wouldn't you expect at least a wage that can cover the rent? Give me a break on the communism talk. You sound ridiculous as usual.

Peninsula Pundit

There you go, waaaay overvaluing again, tracker.
Honestly, do you expect anything else?
That's sort of crazy,too.
This is a 'comment' board.
Most definitely not a 'give and take of ideas in a reasoned discussion' board.

deertracker

My bad. Some habits are hard to break.

Peninsula Pundit

I understand.

grumpy

Re: "IF you worked wouldn't you expect at least a wage that can cover the rent?"

Depends. Is it a skilled trades? Is it a job mowing lawns? a doctor? a steel worker? A part time dish washer? a full time car salesman? a part time farm worker?

Some of those should be able to pay rent with their earnings, some shouldn't. An entry level, part time job doesn't meet that level, most entry level full time jobs probably should not either. Depends are more than the name of your undies.

SamAdams

No. Expecting my wage to cover the rent has a VARIETY of factors, including the number of hours worked and the skill level needed to perform those hours of work. I don't think somebody who power washes the garage floors should be paid the same as the man who fixes the transmission. Do YOU?

deertracker

No it doesn't have a VARIETY of factors. Regardless of what job you do a fair wage is necessitated. The garage floor is usually cleaned by the same guy that fixes the transmission. Try again!

SamAdams

Fine. The hotel maid shouldn't be paid as much as the guy that rebuilds my transmission, who shouldn't be paid as much as the surgeon who took care of my medical problems. While PEOPLE might have equal value, the jobs they do DON'T.

A "fair wage" is subjective. It's also far from "necessitated." Don't make enough to pay the rent? Get more skills or get a roommate. That's what most of us did when we were starting out! In the spirit of TRUE fairness, people should be paid what they're worth (which is typically what the market will bear).

deertracker

So you value your transmission far more than having a nice clean bed to sleep in? Pay a fair wage and one won't need a roommate. Someone is still needed to do those jobs you think people should work for very little money. The maid is just as important to the hotel owner as the mechanic is to the repair shop owner. BTW, there's lots of jobs that pay far more than what our President earns.

Peninsula Pundit

In this analogy, where does the person who teaches the next generation of Americans fit in?
That answer will say a lot about a person's priorities.

thinkagain

Value added for value received.

Contango

Re: "fair wage,"

Typical fuzzy progressive term. What does it mean?

Answer my question:

So raising the min. wage will cause workers to increase output (productivity)?

Aren't you asking them to be paid more for the same amount of work?

How does increasing wages increase productivity?

And if it does, why not increase the min. wage to $20,50,100/Hr.?

deertracker

No pooh, the goal is to be able to pay the rent. If the workers are not productive they need to be replaced. If you increase a worker's wage you can increase the worker's responsibilities thus increasing productivity. If you can run the shift with less workers and still meet your production goals or achieve the required cost percentages you have managed your business well. Increasing the wages to 50 dollars per hour is not practical or sustainable for most businesses so please stop with your dumb questions!

Contango

Re: "the goal is to be able to pay the rent."

How much is that deerturd?

Nice fuzzy concepts without facts or figures.

Give them more "responsibilities" for higher wages? Where's the gain?

Since your an "expert, when are you starting your business, and paying top wages and benefits?

No $50/Hr.? According to you, don’t higher wages lead to more productivity?

deertracker

^^^^^^^^^^^^^^^ that's why you are clueless!^^^^^^^^^^^^^^^^^^^^

Contango

Re: "clueless,"

Because you post nonsense?

If a gal. of gas goes from $3.00 to $5.00, do you tend to buy more or less?

Raising the cost of labor is the same.

Peninsula Pundit

Not because he posts nonsense, but you keep blah blahing about a 50 dollar min wage which no one has rose to support, although you've posted basically the same thing at least 10 times.
You remind me of the House that keeps voting to repeal the ACA.
They are as clueless as yourself.

Contango

Re: "Not because he posts nonsense,"

Good to see that you agree that he posts nonsense. :)

Better RE-READ the above article and attempt to comprehend it.

Contango

Re: "Give me a break on the communism talk."

True. Marx valued work. If ya didn't work, ya didn't eat.

Progressives ignorantly seek the "Land of Cockayne," where nobody works and everything is free.

The Big Dog's back

Let me think. We have been increasing productivity for how many years now and who has benefited? Oh yeah, the top 1%.

Contango

Re: "We (snip)"

"We"?

Haven't you marched into your boss's office and asked him for top wages since you're so productive?

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