The non-partisan Congressional Budget Office has released its analysis of the likely effects of a national minimum wage increase. Its analysis, in short: Lifting the base wage to $10.10 an hour would increase wages for 16.5 million people, lift 900,000 people out of poverty, and potentially cost 500,000 jobs.
But in order to better serve the American audience, we've broken those details down by political party. Click the appropriate button below to get your assessment of the CBO report pre-fabricated for your worldview.
The Democratic perspective
The Republican perspective
The complete overview
There's no real way to gloss over one of the CBO's main determinations: a minimum wage increase, whether to $10.10 an hour or to $9.00 an hour would reduce employment. The 500,000 figure above is only an estimate, but the range the CBO provides at the $10.10 level could get much worse. At best, there would be only a small drop in employment; at worst, the increase could cost as many as a million full-time jobs. This isn't a full-time-employee-hours-worked deal, either, the way the new Obamacare assessment was.
The CBO explains how it accounts for those numbers, including suggesting that the increase in employment that would result from people having more money to spend is dwarfed by the decrease in jobs because employers cut back costs.
That decrease would be the net result of two effects: a slightly larger decrease in jobs for low-wage workers (because of their higher cost) and an increase of a few tens of thousands of jobs for other workers (because of greater demand for goods and services)
What's more, the benefit from the minimum wage increase would be heavily skewed toward lower income levels. By 2016, every income group would see a net increase to real income in 2013 dollars — except for people who make six times the poverty level and higher. Among the highest wage earners, average family incomes could actually drop by 0.4 percent.
Oh, and the price increases for consumer goods that would result from paying low-wage employees more means that the federal deficit could increase as a result of increased costs.
But there is good news.
The effects of a minimum wage increase at either the $10.10 / hr. or $9.00 / hr. levels would be significant. Overall real incomes would increase by $2 billion for all Americans. A $9 / hr. increase could cost 100,000 jobs or, depending on how the CBO's modelling shakes out, could actually lead to a slight increase in employment.
For those earning less than $10.10 an hour, the change would be obviously most immediate. Some 16.5 million people would see immediate wage increases, and people below the poverty level would see an annual increase of $5 billion more in income. As an anti-poverty move, the minimum wage increase would be particularly effective. About 2 percent of Americans currently in poverty — some 900,000 people — would move out of poverty thanks to the higher wages.
The money for those wages would come, in part, from corporate profits, the CBO notes. Given the rate at which those profits continue to grow against gross domestic product, it seems likely that most large businesses would take the new costs in stride.
Update: The White House has now criticized the CBO's job loss numbers, which the head of the president's Council of Economic Advisors says "does not reflect the consensus view of economists who have said the minimum wage would have little to no impact on employment." The White House puts the estimate of job losses instead at "zero."
The question of lawmakers largely comes down to this: Is the prospect of decreased employment worth raising wages and moving people out of poverty? How they answer that question is probably dependent on which of the above buttons they would have clicked.
This article is from the archive of our partner The Wire.
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