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.

National Journal
Catherine Hollander
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Catherine Hollander
Feb. 19, 2014, 7:08 a.m.

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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