Hike in Minimum Wage Could Cost Half-Million Jobs

Obama Minimum Wage
Jacquelyn Martin/AP

WASHINGTON -- 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.

Obama Raises Minimum Wage For Federal Contract Workers

Increase your money and finance knowledge from home

Basics of Diversification

Learn one of the fundamental concepts of building a portfolio.

View Course »

Investing in Emerging Markets

Learn to invest in a globalized world.

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:

Hike in Minimum Wage Could Cost Half-Million Jobs

500,000 lost Jobs due to increasing the Min. wage is a low estimate.

When employers cost increase they have Three options, reduce other cost to allow for the wage increase, rise their product or services price thus passing the increase on to their customers and 3 reduce jobs...

An example of past min wage increases is ... today a burger combo meal now cost $5 bucks. Over time the increase purchasing power that the latest min. wage increase is lost due to higher product and service cost.

So there is a double edged problem that min. wage increase cause, one is Job lost the other is higher prices....

In the end the only long term benefactor of mandated higher min. wages is government.

February 19 2014 at 1:00 PM Report abuse rate up rate down Reply

food for thought
$20,800= 10.00 hr x 40 hr. wk x 52 wks.
- 6,656 total tax@.32% for single person( fed., local,state,uc. comp., etc.)
-4,200 rent@ $350/ month( 1 rm. efficiency- no utilities)
- 900 nat. gas bills @ $ 75/ month(budget billing)
- 900 electric bills @ $ 75/month ( budget billing)
- 360 water bills @ $ 30 / month
- 792 phone bills @ $ 66 / month ( basic land line, no internet)
- 2600 gas for vehicle @ $50/wk for work,groceries
- 1284 for car insurance @ $107 / month( 10 yrs. old, liability only)
- 2600 for food @ $50/wk / $ 7.14 a day ( breakfast, lunch,supper)
+ 508 left over for yr. divided by 12 months =$ 72.33 / month divided by 4 wks
= $ 10.58 a week in the wallet. Wait,gotta have obama care or get fined.
with what money? This is the reality that our children and middle age adults face
daily if they are lucky to make $10.00 an hour. All they do is exist. What a future ,huh?
Minimun wage should be $12.50 / hr. nationwide in all states.

February 19 2014 at 11:18 AM Report abuse +2 rate up rate down Reply
1 reply to armstrongrainman's comment

Dunce, the employee doesn't pay Fed and State UC Insurance or Work Comp. Get your chitt together or shutup

February 20 2014 at 9:01 AM Report abuse -1 rate up rate down Reply
Hi Gram, Ty&Dill

They really count on the American People being stupid. Business owners, corps. are not going to give up any of thier profits to pay higher wages. They will either cut back on employees or raise thier prices. Employers/companies DO NOT CARE about thier employees anymore. Greed has overtaken this country.

February 19 2014 at 9:00 AM Report abuse rate up rate down Reply

A rising tide lifts all ships. JFK 1962 Pueblo Colo.

February 19 2014 at 9:00 AM Report abuse +1 rate up rate down Reply
Hi Gram, Ty&Dill

a minimum wage boost to $10.10 would help some people making more than that amount as bosses adjust their pay scales upward.

LOLOLOL, yeah, cause that'll happen.

February 19 2014 at 8:48 AM Report abuse rate up rate down Reply

Much like the theory of relativity, the economic principles of supply and demand do not change in a free market. Obviously this simple concept is far too complex for the simple minds of Harkin, Obama and the rest of the democrats to comprehend. More sophisticated methodologies is political speak which means someone paid off some pathetic doof with an economics degree to plug in fraudulent information and arrive at a conclusion pleasing to the politician who paid him off.

February 19 2014 at 8:04 AM Report abuse rate up rate down Reply
Mr. Golf

This cannot be true because the democrats said such a thing would never happen and it's all a farce that Obama care is not good because they also said it is the greatest thing that could ever happen to the country.

February 19 2014 at 8:04 AM Report abuse -1 rate up rate down Reply

Total BS. Go ahead and spew your same old Repuke garbage. The 1% are in their own little world. No clue on how hard it is on 7.25/hr when prices for everything we need continue to rise EVERYDAY. I'm talking prices on fuel, food, clothes, shelter, not diamonds and yachts. How much more can we take? Answer is NONE. Take crude for example, it rose 2% in the last two days. Why you ask? Because the "Commodity Market" says so due to higher demand. What happens when demand goes down? They cut production. It's all a game of the rich squeezing more and more and more, it's NEVER ENOUGH FOR THEM. There will be a point of NO RETURN in America and it's not as far away as the 1% think. Think about it CONGRESS MEMBERS.

February 19 2014 at 7:23 AM Report abuse rate up rate down Reply

In any event OMG

February 19 2014 at 6:25 AM Report abuse -1 rate up rate down Reply