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

Fordman

Say goodbye to the middle class! This will give every lazy person out there an opportunity to make more money, and settle down on minimum wage instead of working hard for a better life, minimum wage wasn't meant to live on.

DGMutley

C'mon, you would never let a minimum wage employee just sit on his butt, would you?

Btw, some folks are stuck working minimum wage jobs for life--enter lifetime felony tags and no mandatory high school graduation.

pntbutterandjelly

Say hello to the middle class opportunities that a higher minimum wage could give those who ARE working 2 and 3 jobs to merely survive! The lower rungs of our former middle-class ladder have been severed by corporate greed and shoved off into the governments derriere to deal with through supplements or so-called "entitlements". The entitled are those at the top of the ladder looking down upon all the peons of their dominion. (Please try again Fordman.)
Ps: What wage do you propose to pay to those who don't have the ability or opportunity for "working hard for a better life"? Sell body parts or...sell their souls?

Dr. Information

Sounds like socialism to me. Everyone gets the same no matter their education, work ethic or knowledge.

pntbutterandjelly

The REAL socialism is giving the "high and mighty" the right to NOT pay a living wage and then...pass the problem off to the Federal Government to deal with and THEN..._itch about those who get a measly minimum wage to live on while they themselves tell their well-paid lobbyists to write some new regulations so they can further benefit from the working stiffs they have shoved down the toilet. (Did I mention how they also don't pay their fair share in taxes?)
Question A + B; How many BILLIONS in aide did the petroleum industry receive last year alone? And that shouldn't be construed as "socialism"?
I get socialism is only "socialism" when you aren't the one getting the money.

pntbutterandjelly

The REAL socialism is giving the "high and mighty" the right to NOT pay a living wage and then...pass the problem off to the Federal Government to deal with and THEN..._itch about those who get a measly minimum wage to live on while they themselves tell their well-paid lobbyists to write some new regulations so they can further benefit from the working stiffs they have shoved down the toilet. (Did I mention how they also don't pay their fair share in taxes?)
Question A + B; How many BILLIONS in aide did the petroleum industry receive last year alone? And that shouldn't be construed as "socialism"?
Socialism is only "socialism" when you aren't the one getting the money.

Contango

Smellin' panic.

The Dems will do ANYTHING in an attempt to take the focus off of the Obama☭are fiasco and maybe help to stem the Nov. political bloodbath.

"4 Reasons The GOP Has A Huge Advantage In The 2014 Election":

http://www.businessinsider.com#i...

Contango

Re: "It also would lift 900,000 people over the federal poverty threshold,"

How many would have to quit work because they'd lose their taxpayer supported subsidies?

Remember: The Dems helped to coin the term "job lock."

Gotta free 'em so they can pursue their passions!

Darwin's choice

Coasterfan probably has vapor lock......

Dr. Information

The title doesn't say it all, actually it could cost upwards of a million jobs. Just another pin in the anti American voodoo doll known as Obama.

jacksonbrowne

Only an idiot would think that a majority of companies would increase wages without making cuts elsewhere. If you have 30 employees and have to raise their wages probably 5-8 are gone to balance out the increase. Oh wait, Pres. Obama fits the idiot mold.

pntbutterandjelly

Oh PLEASE! If companies cut their work force...they would also be cutting their own production and consequently their own profits. Do you REALLY think they'll do that? Get a grip. (It's somewhat odd that the average worker, both low and middle wage, incomes have either stagnated or fallen behind NOT EVEN factoring in inflation while executives incomes have gone through the roof.)

jacksonbrowne

You are ignorant like the rest of the democrats. Do you really think there will be a production slow down at fast food restaurants? Grocery and clothing stores? Most manufacturing jobs pay more than minimum wage. The service industry is the leading minimum wage paying arena.

Peninsula Pundit

I should report you to the real Jackson Browne.
I'm sure he'd repudiate every comment that's dribbled down your leg.
You mean if there are less people the same amount of work will get done?
What a dip.

jacksonbrowne

Put your real name out there penises. Residual effects. Front line people will probably not see any changes. Supporting cast is where you will see the cut backs.

Dr. Information

Good point jacksonbrowne. Lets take my friends law care business for example. He employs mostly HS and college kids during the summer. He pays them $8.00 an hour without complaints. Now, if he has to pay them 10.10 an hour, he already said he would have to let one of them go permanently. While its only a 2 dollar an hour raise, he said it would cost his small company more than $6,000 more in wages for 5 people.

We aren't talking about a guy who makes 6 figures and has a cushioned job. We are talking about a guy who has less than 10 employees, makes probably 40-50K himself and has a lot of equipment to maintain, etc.

He said it would either be the decision to raise prices to offset the cost increase or do away with a full time summer position or possibly 2.

Contango

Simple economics:

70% of the cost of labor are wages, the remaining 30% are benefits (including the employer portion of SS & Medicare).

Push up the one, the other rises as well.

Wanna end unemployment tomorrow?

Eliminate the min. wage.

Wages would eventually settle out and revert to the mean.

deertracker

It's obvious you are either clueless or a big fat liar!

Contango

Re: "It's obvious (snip) "

Tsk, tsk. Personal accusations and name calling.

Care to explain, deerturd?

Peninsula Pundit

Tsk,tsk, indeed.
YOU'D never do that, huh?
Dr. No and jackson do it for you?

deertracker

It' a summer seasonal business and different rules apply to seasonal employers. He probably pays cash under the table and it's very doubtful he claims his income because it is a cash business. You guys get on here every morning and complain just to complain. Yes, jobs will be lost but productivity will increase and the employer will not lose a dime. If the working poor has more money they will spend it thus helping the economy grow. Especially highschool kids. You guys are only concerned about yourselves, not America, not the economy, or anyone else's well being. Your idiocy is very transparent and it's very obvious that you have no answers. NONE!

Contango

Re: "productivity will increase,"

Then why not increase the min. wage to $50/hr. and watch "productivity" go through the roof?

On an economic basis, do you even know what the term "productivity" means?

Continue not to think, but just keep listening to your puppet masters. They know ALL.

BabyMomma

Stop cupping your farts and smelling them, it's getting to your head. You drive a Hybrid Don't you? You should move to San Francisco.

deertracker

@ Babymomma
Your family called. They found your brain in a creek next to your home! Run along!

Peninsula Pundit

Remember what you told me the other day,tracker. Don't over-value.
In that vein, isn't amazing how all these people are very certain what will kill jobs, but their ideas to create jobs, judging from the proposals put forth thus far, is to change nothing.
We all know what the definition of insanity is.
I would suggest they are insane.
Referring to them as idiots casts aspersions on the mentally challenged.
Good Day.

deertracker

You are right, my apologies to the mentally challenged.

Dr. Information

What different rules apply? He doesn't pay them under the table, he runs a business and has to pay workmen's comp, taxes..etc.

Doesn't claim his income? How many people run a lawn business that send out statements via the mail to their customers and get cash sent to them via the mail? Didn't you learn in grade school, you never send cash in the mail. I just text him out of curiousity. He says the last time he received cash was when he first started out, 20 years ago followed by an lol. 95% checks, the other 5% bank checks from people paying their bills online. So anymore words of wisdom chief?

pntbutterandjelly

He too will not settle for loss of production. He like others will merely pass the increase on to his clients. That then adds some additional stimulus to the economy in many POSITIVE forms RATHER than a downward spiral of deflation and L O W E R yet wages. Sooner or later that downward spiral leaves the working class with Z E R O. Right, exactly, where the corporate-mongers want it. Hence, Economic Slavery. (Now...don't ya' just love Trickle Down Economics?)

Peninsula Pundit

I wonder when the Register is going to get the 'Thumbs Up' system?
+1 on all your posts here.

pntbutterandjelly

>>Dr. Information<< Since when do attorneys need a "law care business"?

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