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CBO Sees Job Losses From Minimum-Wage Increase CBO Sees Job Losses From Minimum-Wage Increase

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Economy

CBO Sees Job Losses From Minimum-Wage Increase

The budget office analyzed a scenario similar to Democratic legislation that's backed by President Obama.

(Justin Sullivan/Getty Images)

photo of Catherine Hollander
February 18, 2014

A scenario mirroring the congressional proposal to raise the minimum wage that President Obama has endorsed could reduce employment by 500,000 workers in the second half of 2016, the nonpartisan Congressional Budget Office said in a report released Tuesday.

The scenario CBO considered, a three-stage increase in the current federal minimum wage of $7.25 to $10.10 by 2016, is similar to legislation proposed by Sen. Tom Harkin, D-Iowa, and Rep. George Miller, D-Calif., which has the backing of Obama and seven Nobel Prize-winning economists.

The budget office said there was a good deal of uncertainty associated with its estimate, which had a two-thirds chance of falling between a "very slight" reduction in employment to one twice the size, 1 million workers, by the same time.

 

The budget office was careful to point out that the negative effects would come with positive ones: "Many more low-wage workers would see an increase in their earnings," the report said. "Further, a few higher-wage workers would owe their jobs and increased earnings to the heightened demand for goods and services that would result from the minimum-wage increase."

CBO also said the $10.10 proposal would reduce the number of people below the poverty line by 900,000 in the second half of 2016.

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