Raising Minimum Wage Would Ease Poverty But Cost Some Jobs

Wage Increase

CNN – Supporters of raising the federal minimum wage to $10.10 an hour say it will increase productivity, lower turnover and increase wages for 28 million workers.

Critics contend that a higher minimum will hurt jobs and consumers.

A new analysis from the nonpartisan Congressional Budget Office indicates that both sides have a point.

The key takeaways from the CBO report: Gradually raising the federal minimum wage to $10.10 from $7.25 would boost the incomes of most low-wage workers and lift 900,000 out of poverty. But it could also result in the loss of 500,000 jobs.

Is 500,000 workers a lot? On the one hand that’s half a million people who will be hurt by a loss of income. But on a more macro level, the CBO said it represents only a 0.3% decrease in employment.

Why could there be job loss? A mix of reasons. A higher minimum wage raises payroll costs for an employer. That employer may handle those higher costs in any of several ways: cut jobs, reduce worker hours, curb summer hiring, opt not to replace workers who leave; book lower profits; or raise prices on customers.

Given the uncertainty of estimates, however, the CBO said there is a good chance the job loss resulting from a higher minimum could be much less than 500,000 — or could go as high as 1 million jobs.

White House economists said they think the effect could be close to zero job loss since businesses’ higher payroll costs could be offset by lower turnover and higher productivity.

In any case, the move would boost wages for most low-wage workers, according to the CBO. Its report estimates about 16.5 million workers who make less than $10.10 an hour would see higher earnings once the higher minimum is fully implemented in 2016, which Democrats in the House and Senate have been calling for.

In addition, the CBO said, some workers earning between $10.10 and $11.50 an hour could also see a raise in what’s known as a “ripple effect.”

And because of the stimulative boost to demand that a higher wage may bring, some workers across the income scale may benefit. The more low-wage workers make, the more they’ll have to spend, and the better that will be for businesses selling products and services.

The CBO report also analyzed a proposal to raise the minimum wage to $9 per hour. Its effects would be less pronounced, with an estimated loss of 100,000 jobs and wage increases for an estimated 7.6 million lower wage workers.

Last week, in an effort to encourage lawmakers to raise the federal minimum, President Obama signed an executive order requiring businesses that get new or renewed federal contracts to pay their minimum wage workers $10.10 an hour starting in 2015. The order is expected to raise wages for a few hundred thousand people.

Once the CBO report came out, there was a partisan rapid-fire response at the ready. Republicans who oppose the $10.10 proposal immediately seized on CBO’s job loss estimates, while Democrats touted the agency’s assessment that a higher minimum would lift 900,000 workers out of poverty.

5 comments

  • Elamax

    What a bunch of liberal tools at KFSM trying to make this seem trivial. You’re not fooling anyone with your propaganda. 500,000 more unemplyed added to the over 90 milliion not working is exactly what you scum want – more people added to the plantation.

  • Panamai

    How is it Obama’s fault if the business owners get greedy and start firing people? Do you have a better idea for easing poverty? $7.25/hr is not doing it at all!

  • arnold fudpucker

    I’m surprised there is enough working people left so that 500,000 more can lose their jobs. The demoncrats have suckered the low info voters for decades on this minimum wage farce. The only beneficiary of a rising minimum wage is the political pukes and the thug unionistas.

  • Sarah 1

    It is entirely possible the GOP base never hear Republicans like Rick Santorum say Americans over 50 do not deserve healthcare, or House Republicans say children and seniors living in poverty do not deserve food, and if that is the case then their self-destructive nature might be excused. However, they are well aware their children, parents, and poor family members are going hungry because Republicans cut 20 meals a month from their food stamp allowance and crave eliminating nutrition assistance altogether, and they know the GOP sequester cut funding for their shut-in parents and disabled family members dependent on Meals on Wheels to survive.  The GOP base in southern states also know they are working for poverty wages because their Republican champions passed “right to work” for less laws and rejected Medicaid expansion to keep those underpaid Republican voters sick and dying. They also have to know that their elderly parents are barely surviving on Social Security and Medicare that Republicans have made no secret is destined for major cuts, but by golly they keep voting for Republicans to teach other Americans they hate the idea of an African American President who continues fighting for their interests.

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