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CBO Defends Its Minimum-Wage Estimate as Democrats Fume CBO Defends Its Minimum-Wage Estimate as Democrats Fume

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Economy

CBO Defends Its Minimum-Wage Estimate as Democrats Fume

The nonpartisan budget referee rejects White House criticism of a report that finds the minimum-wage hike would reduce the workforce.

(JOEL SAGET/AFP/Getty Images)

photo of Catherine Hollander
February 19, 2014

White House pique notwithstanding, the Congressional Budget Office is standing by its estimate of the job impact that a minimum-wage hike would create.

"Our analysis of the effects of an increase in the minimum wage is completely consistent with the latest thinking in the economics profession," said CBO Director Douglas Elmendorf, disputing the Obama administration's attempted takedown of his agency's work.

The White House and congressional Democrats tried to paint CBO as out of touch with mainstream economic thinking after the nonpartisan budget agency estimated raising the minimum wage to $10.10 an hour could reduce the number of workers in the labor force by 500,000 in 2016. (It also found that the wage proposal would lift 900,000 people out of poverty in the same year.) Republicans seized on the news of job losses as evidence a higher minimum wage is bad policy.

 

Elmendorf argued that it's a little hard to compare CBO's findings, which covered both an increase in the federal minimum to $10.10 and to $9 from the current level of $7.25, with other economists' assertions on the job impact of the minimum wage because the latter didn't necessarily have to quantify their estimates. But, he said, CBO appears to line up with what other economists—who have spoken in qualitative language—have found.

The budget-office director pointed to a survey of economists conducted last year by the University of Chicago Booth School of Business's Initiative on Global Markets, which found them about equally divided on the question of whether a hike of the minimum wage to $9 would make it "noticeably harder" for low-skilled workers to find jobs. "We don't know exactly what the respondents to that survey meant by 'noticeably harder,' " he said, but CBO's estimate might track with that.

He also pointed to a letter, organized by the liberal Economic Policy Institute, signed by 600 economists in support of raising the minimum wage to $10.10. Some signatories of that letter were among those criticizing CBO's report Tuesday. But, Elmendorf said Wednesday, "I'm not sure we would disagree with their statement of the evidence." The letter said, "The weight of evidence now show[s] that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers." The authors didn't say what "little" meant, Elmendorf told reporters at a breakfast hosted by the Christian Science Monitor, but "the range we [the CBO] have looks to me like a little reduction," he said.

Elmendorf did not respond directly to remarks from the White House Council of Economic Advisers' Jason Furman, who said the CBO view was "outside the consensus view of economists when it comes to the impact of the minimum wage on employment."

The White House's criticism of the nonpartisan budget referee was a departure from its response two weeks ago, when CBO issued an equally controversial report finding that Obamacare could reduce the labor force by the equivalent of 2 million full-time workers in 2017. The White House stepped forward to clarify those findings, which the GOP was holding up as proof the law was a "job-killer," not to question them.

"I don't want to respond directly to what the CEA has said," Elmendorf said Wednesday, referring to the minimum-wage findings. "We try to talk about our analysis and let other people talk about theirs."

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