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

pntbutterandjelly

Big Dog; Isn't it rather "odd" (read: disheartening) to see how so many people miss (intentionally or otherwise) what is really going on around us? The top 1% incomes have outstripped the average American's income and yet...people here on this post still "don't get it". The "income disparity" is directly (and obviously) tied to the amount of control that is available. And still...there are those who are against the very things that will help those (themselves included) who are not within the circle of the 1%er's. It IS amazing.

pntbutterandjelly

Okay then Sam>>>>let's cut their (and your) wages and see how well that works out. Are you ready to make your contribution to this theory?

Contango

Re: "let's cut their (and your) wages and see how well that works out."

Do you feel underpaid for your work?

Justme...

QUESTION FOR DEERTRACKER: What size household should a single minimum wage earner be able to support? You say they at least ought to be able to pay their rent. That's pretty vague. Personally, I'm in favor of ending this fight by establishing a fair minimum wage, then tying it to inflation so we can quit wasting time and money debating it. What should it be? How many people should it support?

deertracker

2! If there's a two parent household and both work, I say at least 4!

Justme...

OK, the federal government says a 2 person household that earns more than $15,730 per year is above the poverty line. So if one person in that household earns $7.56 an hour, and works 40 hours per week, they are above the poverty line. Folks, you heard it here first: Deertracker thinks the minimum wage should be $7.56 an hour.

deertracker

You forgot to deduct taxes there sport! Recalculate!

Justme...

Well Sport, some organization deduct taxes when using poverty level guidelines, and some do not. But, to give you the benefit of the doubt, that same person would have to earn $17,308 to pay their taxes. Therefore minimum wage should be $8.32 an hour according to deertracker. A little higher than it is, but much lower than what the administration is trying for. So let's settle on, say $8.32 an hour, tie it to inflation, and quit fighting about it every 5 years. The problem is, democrats don't know what it should be, they just think it should always be more than what it currently is.

Dr. Information

deer forgets that at that level, come April they would get nearly all the taxes they paid in back in one check. Time for that new TV.

deertracker

....and the cons want to pay with a loaf of bread and gallon of milk.

deertracker

You lose justme!

Justme...

Because you say so? Don't think so. I followed your logic and determined a minimum wage - rather than pulling a number out my @$$. I am agreeing with you: The democrats' goal is pull people out of poverty, and a person who is the head of a single income household of two should make an amount such that they are above the poverty rate. Therefore...$8.32 an hour. Deertracker and I agree on something! ;>)

deertracker

Yes because I say so! LOSER!

Dr. Information

typical response from deer when proven wrong.

jacksonbrowne

Well sport they will be getting all of their taxes back plus some when they file their tax return. Guess that blew your theory.

anthras

Re: You forgot to deduct taxes there sport! Recalculate!

Most persons in that wage class do not pay any federal income taxes however if the head of a household they do receive earned income tax credits.

KURTje

What is the pay & medical afforded to the migrant farm labour used in Ohio? Anyone have facts? (The taxed citizen pays here)

grumpy

If you're interested search. Quit being lazy and wanting others do for you. Walk your own path and take responsibility.

KURTje

Thanks for my government $$ grump. Never lazy though fired my propane supplier.

Contango

Re: "Thanks for my government $$"

And what are you currently doing to deserve it?

Burning wood? Don't care about global warming eh?

grumpy

Re: "Never lazy though fired my propane supplier."

What does one have to do with the other? And yes you are lazy if you expect others to look up stats for you. Lazy or don't know how to search.

Really are you ...

A lot of the hardest workers are the people just starting at a place of employment. These people are subject to the 89 and out, poor policy, or companies leaving to make more money somewhere else. Respect and pride have left. America has turned more towards a degree oriented society. If everyone had an associates of applied science degree, who would fill the general laborer positions. Blinders, easy way out. Open your eyes bring back decent wage jobs.

SmartCapitalist

How about this... we leave the minimum wage alone and reform the US government. Get us out of the perpetual blank check government programs give more money back to the people and get back on track. Then you will get a real pay raise!

The Big Dog's back

Go back and sit in the corner.

Contango

Re: "Go back (snip)"

Time for you to be let outside to 'do your business.'

deertracker

@BD
LOL!!!!!!!!!!!!!!!!!!!

SmartCapitalist

Little dog yelp... you should go back to the porch and let the real big dogs handle this one.
Don't get me wrong I would love to see wages rise in the U.S. but it should be through proving to your employer that you are worth more. It takes hard work and a little self confidence to approach your employer but if you truly feel you are worth more than what you are being paid it's a risk you have to take.
By the way I actually know what I'm talking about, I'm a middle class business owner who employs people in manufacturing sector. So unless you your self create wealth for others (i.e. a business owner) you really have no clue. My company DEFINITELY pays well above the minimum wage but I've got some employees that I'd love to give a pay raise to because they work hard others I'd love to bump down to minimum wage because they are worthless but when you exist in a union environment you can't reward people for their personal accomplishments like you can in non-union places. So what else do you have for me...

jacksonbrowne

Great read today from Walter E. Williams, Economics Professor at George Mason University. This read fits right into this article:

"No one can blame a person if he starts out in life poor, because how one starts out is not his fault. If he stays poor, he is to blame because it is his fault. Avoiding long-term poverty is not rocket science. First, graduate from high school. Second, get married before you have children, and stay married. Third, work at any kind of job, even one that starts out paying the minimum wage. And finally, avoid engaging in criminal behavior. It turns out that a married couple, each earning the minimum wage, would earn an annual combined income of $30,000. The Census Bureau poverty line for a family of two is $15,500, and for a family of four, it’s $23,000. By the way, no adult who starts out earning the minimum wage does so for very long."

http://econfaculty.gmu.edu/wew/a...

There are several other good points in this article as well so take a couple of minutes and read it. Makes one say hmmmmmm.

The Big Dog's back

jacka$$brown, LPT (Long Term Poverty). The new term Cons like to use. Replaces the welfare queen term of Raygun.

jacksonbrowne

Pretty simple dogdoo and I know that you and deerpoop won't understand this theory. A person controls their own destiny. I don't control yours and you don't control mine. If you want something bad enough you will work to achieve it.

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