CBO Sees Job Losses From Minimum-Wage Increase

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

Job seekers wait in line to enter the San Francisco Hirevent job fair at the Hotel Whitmore on July 12, 2011 in San Francisco, California.
National Journal
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Catherine Hollander
Feb. 18, 2014, 9:23 a.m.

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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