Report: Minimum Wage Hike Would Lift Earnings But Cost Jobs

A report from the nonpartisan Congressional Budget Office enters a polarizing political debate

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US President Barack Obama speaks on the economy at the Safeway Distribution Center in Upper Marlboro, Maryland, on February 18, 2014

President Barack Obama’s plan to increase the federal minimum wage would raise earnings for millions of Americans and lift almost one million out of poverty, but would also cost the economy hundreds of thousands of jobs, according to a new report.

The report released Tuesday by the nonpartisan Congressional Budget Office said that hiking the minimum wage from $7.25 per hour to $10.10 per hour would increase earnings for 16.5 million workers by the second half of 2016 and would create some jobs as higher-wage workers had more money to spend. But it would also reduce total employment by about 500,000 workers, or about 0.3 percent, the CBO said.

Obama and congressional Democrats have been trying to make the minimum wage a key issue ahead of the 2014 midterm elections, arguing that the federal government should do more to combat income inequality. Obama said during his State of the Union address last month that he would issue an executive order raising the minimum wage for a limited number of federal contractors, but an increase in the minimum wage for all workers requires congressional action.

Republicans have opposed a minimum-wage hike as destructive to the economy, and both sides used the new report to hammer home their points on Tuesday.

“This report confirms what we’ve long known: while helping some, mandating higher wages has real costs, including fewer people working,” said Brendan Buck, a spokesman for House Speaker John Boehner. “With unemployment Americans’ top concern, our focus should be creating—not destroying—jobs for those who need them most.”

White House Press Secretary Jay Carney responded to continued Republican opposition by pointing to “ample documentation from respected economists who say the opposite, that there is not evidence that it has a significant impact on jobs and that, to the contrary, it’s beneficial to the economy and to efficiency and productivity.” White House senior adviser Dan Pfeiffer said a natural extension of the GOP’s argument would be to cut wages deeply.

The CBO’s latest report is sure to be a point of continued political wrangling in the months ahead. House Minority Leader Nancy Pelosi said in a statement that “no matter how the critics spin this report, the CBO made it absolutely clear: raising the minimum wage would lift almost one million Americans out of poverty.”

A smaller minimum wage hike to $9 per hour—the plan Obama floated last year—would have a less dramatic effect on the economy, CBO projected, with 7.6 million Americans seeing a rise in wages and overall employment declining by 100,000 workers.

103 comments
ThomasHall
ThomasHall

The amnesty of illegals in the 1980s happened under Reagan who wanted to exploit cheap labor. Those that complain about construction companies using lower-paid illegal construction workers should attack the construxction companies that profit from it. All in all, in California, mostly Hispanics work in agriculture which white and blacks do not want to work in as the pay is low and teh work is very hard.

How many of your smug, right-wing twits have ever worked in agriculture or even done any serious physical work? Get real. Hispanic laborers have been an overall benefit to the cost of food which people take for granted. As more GOP fight against illegal laborers more fruits and vegetables will continue to be imported from Mexico without the FDA inspector oversight.

There has always been prison labor. Yet, now, there are 100 private prisons and our prison population went from 250,000 in 1971 under Nixon and now is over 2.3 million thanks to Nixon's failed $2 trillion "War on on Crime and "War on Drugs" with another five million on probation aor parole.

Prison labor amounts to nearly half with figures as high as one million. Pay ranges from 23 cents to 4.25 per hour, some imates receive time off in lieu of pay, and many are paid nothing. Inmates are not just making license plates, but furniture, jeans, bullet proof vests, operating farms, working with animals, etc. Look it up.

ThomasHall
ThomasHall

"...hiking the minimum wage from $7.25 per hour to $10.10 per hour would increase earnings for 16.5 million workers by the second half of 2016 and would create some jobs as higher-wage workers had more money to spend. But it would also reduce total employment by about 500,000 workers, or about 0.3 percent, the CBO said."

Recall that in 1960 the minimum wage was around $1 hour an hour yet it has been raised many times and overall created many millions of jobs.

That raising the minimum wage will hurt jobs has been the standard argument the greedy rich GOP use each time in opposition but it has never panned out. Overall, raising the minimum wage creates more jobs as working class wages go into the consumer-driven economy rather than the wealth investment of the rich top one-percent that the GOP love to call the "job-creators" which of course is a bold-faced lie. 

Further by raising the minimum wage, taxpayers do not continue to pay for the welfare that the working poor that work for WalMart, McDonalds, and other retail, fast food, hospitality, and other low-wage jobs where those with families cannot make ends meet without Food Stamps, Headstart, rent assistance, etc.

ahandout
ahandout

Here's another way to lower wages, import millions of illegal, uneducated workers to flood the labor market.  Just sayin'.

TucsonTerpFan
TucsonTerpFan

The problem with this Time writer and others who advocate for a min wage increase to a “living wage,“ is that each time it has been raised, it has never “done the job“; it has never yet reached, to those who continue to say it should go higher, a “living wage.“ Will, to these people, we ever reach that so called "living wage?"

Remember the fast food workers one-day strike for a wage of $15 dollars an hour? Well, many like to look to Europe for how an economy should be run; however, there may be an indication from Europe about min wage jobs and job cuts in the fast food area.

In the US, over 80% of McDonald's restaurants are owned by individuals and not by McDonald‘s “greedy execs" as a corporation. Some individuals own more than one franchise, but many only own one, especially in small US towns.

Most franchise owners don't make "big bucks" in yearly income. Many of the CEO wages often cited are not applicable to most franchise owners no matter which “brand“ of restaurant they own.

As for min wage, today in "euro-using" European countries (18 nations now use the euro), some fast food restaurants, in part, because of different languages spoken, are replacing front counter workers/"order takers" with I-pad screens with pictures of the items and the option to change the language displayed with the touch of a finger and then place an order with no human involved.

If the min wage gets too high in the US, don't be surprised if US fast food outlets endup doing the same thing. More technology; fewer min wage workers!

Yes, the “raise the min wage” polls track well, but it also depends on how the question is asked. It there’s a loss of jobs component, or a cut in hours, or benefits, or higher prices to customers in the “raise the wage” question, it does not poll as well with most Americans.

JanetLeClainche
JanetLeClainche

I did jury duty yesterday with a woman who works at Chili's. She earns tips. She's a single mom, no car. Her holiday indulgement was a Coach tote. Her daughter's Christmas gift was a box with new pajamas, a holiday DVD and popcorn as filling). I don't think she or any other waitress makes up the minimum wage in tips. Her estimate is $4.00/hour. Oh, no health insurance either since last time she looked at Medicaid (pre-ACA) she didn't qualify. I urged her to look now and hope she can find something affordable.

People like that need to be lifted out of poverty. They work hard for themselves and their families. She did not want to be dependent on the state. She was doing her civic duty and had she been put on the jury would have been worse off by the loss of income (since she doesn't have an income from her employer she isn't covered by the mandate that employers pay $50/day in this state).

Our large employers need to pay a fair, livable wage to their employees. I don't care if the next time I go to Chili's I pay a couple dollars more for my meal. Really. Do you? As long as it goes to the waitress who serves me and not the CEO's bonus.

Oh, and you can't export that job either!

Arimathean
Arimathean

Sorry, I don't buy it.  I've never known a business to hire based on wages.  They hire based on the need to fill positions.  If I'm running a call center, I'm not sitting at my desk in human resources saying, "Ok, I've got to hire $150/hr worth of workers."  I'm thinking, "Ok, I've got to hire people to man 15 phones."  

And as others are saying: If a business can't support itself enough to keep wages up with inflation, it deserves to have a competitor beat it.

Paul,nnto
Paul,nnto

If a business can't afford to pay ten bucks an hour in 2014 then we don't need them. 

reallife
reallife

If raising the minimum wage is so good, why stop at $10, why don't we make it $30? heck! let's go all the way to $50





GuoLiang
GuoLiang

Compassion: The worst reason to do anything.


The real question is, how would a minimum wage increase affect competitiveness with other countries? 

DonRojelio
DonRojelio

Could you imagine slap to the face for all the Americans who worked hard to earn the raises that brought them to the $8-$10 bracket?  You would marginalize those people as well.  How will they be compensated?  By asking for raises.  This trend will devalue the dollar.  Gas prices will go up again.  This is downright foolish.  You bleeding heart liberals are really stupid.  Think with your head not with your heart.  If you feel so sorry for the unfortunate who have running water, cheap food, public transportation, freedoms, an iPhone but work a measly $7ish an  hour, then you are fools.

DarleneRitterGoodfellow
DarleneRitterGoodfellow

It's my understanding the job losses would be temporary - the 16.5 million lifted out of poverty, not so much! So let's see, some temporary pain for 500 K < 16.5 million out of poverty, no?

ReneDemonteverde
ReneDemonteverde

The hits keep on coming and Obama and the Dims are reeling. Keep it up CBO and it will be a KO. And it will be the end of BO. {Barrack Obama, not body odor}

ThomasHall
ThomasHall

They are already here as undocumented immigrants and many have been here for decades and are not collecting welfare or other federal government assistance. The other source, that particularly the GOP use, are the privatized prison systems using ultra-low wage, captive labor that does take away US jobs in manufacturing from jeans, to furniture, to license plates, and agriculture.

ThomasHall
ThomasHall

The average McDonald's hourly salary is $8.80 the CEO hourly salary is $6,800 or 880 times. Do a Google search of the top low-wage companies and their CEO comparison. Anybody who had to work in low wage jobs even temporarily knows how you cannot get ahead.

Thanks to the GOP-Reagan-to-present failed "trickle-down economics" incomes for teh top one percent went up 275% from 1979-2006-on, and while the Middle Class shrank by 25% and wages for the 99% stagnated. Since the 1970s, 60,000 manufacturers have gone overseas or to Mexico, five million manufacturing jobs have been shipped overseas under Bush-Cheney alone while over $400 billion in taxes goes uncollected from thousands of offshore corporate tax dodgers.

As unions declined with the loss of manufacturers so has pay and benefits. Those jobs went to countries paying $1-3 per hour, $28 per month in Bangladesh, 30 cents per hour in Vietnam. Who in America can compete with those pay scales even US captive prisons and privatized prisons pay better.

What can one say about dull, bigoted, working class GOPeons who still blindly support the GOP which has historically NEVER represented the working class but instead the rich and rich corporations that want to exploit workers at every turn for money while receiving massive tax breaks in the process.

tom.litton
tom.litton

@Arimathean The higher the labor costs, the more incentive to automate or export that job.  


Or the employer could make their current employees man 2 phones instead of 1.  


Regardless, what's the point of having a job if you can't support your family with it?  It's better to get 1 million people out of poverty, even at the cost of 500k jobs.  At least that's my opinion.

grape_crush
grape_crush

@Paul,nnto

True. It's a matter of social utility. If a business' profit is dependent on keeping its workers at poverty level or lower, then it's a negative drag on both the economy and overall society.

manlyman
manlyman

@Paul,nnto "If a business can't afford to pay ten bucks an hour in 2014 then we don't need them."

What?!!

Wow, you're really in touch.

Irony
Irony

@reallife  

Yeah! And if bathing daily is good for you, why not bathe 30 or even 100 times a day?

PaulDirks
PaulDirks

@reallife  Because if you're working full time, you should be able to feed your children.


tom.litton
tom.litton

@GuoLiang Most of those jobs are things that can't be outsourced.  Certainly some of the 500k job losses will be because of outsourcing, but mostly it isn't relevant.  


MrObvious
MrObvious

@GuoLiang  

Just fine. Other countries pay better. We're simply brainwashed to think that unmitigated greed and bloat is better then a large middle class. It's the perfect con.

jmac
jmac

@GuoLiang  Yes, compassion for the wealthy is a proven economic disaster.  Didn't work in the 20's; didn't work in the 0's. 


 And which other countries?   European countries?  They pay the guy who cleans the streets and picks up the garbage, plus he has health care.    Do you mean India and Africa?  Must we drop to their level?  

tom.litton
tom.litton

@DonRojelio I've seen an economic study that says price increases wouldn't be terrible.  A 10% raise in min wage would equate to 4% raise in fast food prices and a 0.4% raise in prices over all.  I can try to find the study if you want to read it.

Irony
Irony

@DonRojelio  

If I fell within the $8-10 bracket, I wouldn't feel "marginalized" at all. I would be earning more money. You see, my well being is not based on some relative position in the wage hierarchy, and I do not derive self-worth from the suffering of those "beneath" me.

Even if I were slightly above the minimum, I would be happy about it because I understand the concept of wage pressure and how it will likely result in a raise for me as well. (Not to mention the whole more people being able to live off what they earn thing).

Also, your assertion that prices will "adjust" is simply not in evidence. It would have an effect, yes, but not a proportional one. The primary drivers of inflation are not the poor.

grape_crush
grape_crush

@DonRojelio  > Could you imagine slap to the face for all the Americans who worked hard to earn the raises that brought them to the $8-$10 bracket?

No, I can't. They'd be grateful to have that wage floor in place in case something happens to their current job.

>  This trend will devalue the dollar.  Gas prices will go up again.

Things that never happen under the current minimum wage level, right?

> an iPhone

Stupid to mention, considering that I just bought a 4S for 99 cents. Even more stupid, considering that these cell phones replace land lines, and also that having a phone is kind of a prerequisite for having a job.

> freedoms

Doesn't help a lot when you have to choose between paying the rent, medical bills, and eating.

> Think with your head not with your heart

Think with your head not lodged deeply within in your own posterior.

roknsteve
roknsteve

@ReneDemonteverde  In the winger dream world prices go up and wages go down.  They are equal opportunity haters of the American people    

ahandout
ahandout

@ThomasHall "They are already here as undocumented immigrants and many have been here for decades"

No kidding?  I live in S. California.  After the last amnesty, millions of additional illegals flooded into the labor force, lowing the wages of skilled and unskilled labor, and forcing construction contractors to match low bids put up by other contractors who hired illegals. 

California has the highest welfare roles in the nation.  The population growth in California is from non-US citizens; you do the math.

I don't know where you heard the fairy tale about prison labor, but you can't be serious.

TucsonTerpFan
TucsonTerpFan

@ThomasHall

So, "since the 1970s..." only GOPers have been in office?  Reagan, had "Trickle-down economics"; and JFK had, "a rising tide lifts all boats."  

Average family income has dropped precipitously during the Obama administration.  Did your family get that $2,500 drop in health insurance premiums?; If you like your doctor...you health insurance...were you able to keep both?

So, who did Barack Obama play golf with last weekend?  (Was this person "rich"?  Did he own a "rich corporation"?  Does he have large investments off shore?) 

Apple creates in the US, but where does it manufacture?  Microsoft creates in the US, but where does it manufacture?  Politically, who do the CEOs of these two companies support?  Under who's "leadership" did the "tech bubble" occur?   Who's given tax breaks to failed green-energy companies in the millions?

Which jobs have you had that you were forced to take? 

Your foolish rant is wasted words; it's claptrap!

MrObvious
MrObvious

@tom.litton @Arimathean  

There's never less incentive to automate. That's simply not true. They're even automating Chinese factories. Increasing minimum wages won't change that fact one bit.

MrObvious
MrObvious

@manlyman @Paul,nnto  


And you're not. By a long shot. For every year US wages lag behind the more Government on all levels have to pitch in. It's not a difficult concept to understand. I can't understand why you argue for a system that put the burden on tax payers by allowing corporations to socialize their cost. Why do you want to pay twice for a corporate product?

ahandout
ahandout

@PaulDirks @reallifeYou can blame that on the devalued dollars coming out of the printing press.  Print more money, raise the cost of everything, declare that there is no inflation, demand that people be able to make a living, rinse and repeat.

reallife
reallife

@PaulDirks @reallife  what about having a brand new car? and a cell phone? and a 55 inch tv? dont "they" have a right to have those also? why not? do you consider "them" inferior?



manlyman
manlyman

@PaulDirks @reallife If you don't make enough to feed children, then don't have them.

The anti-child gang, suddenly concerned about the kids.

reallife
reallife

@jmac @GuoLiang  "Do you mean India and Africa?  Must we drop to their level? "


keep voting democrat and it'll happen soon enough



tom.litton
tom.litton

@MrObvious @tom.litton@Arimathean I'm guessing that the effect is minimal, but probably present.  But again, that is just a guess.  

I would assume making people work longer/harder accounts for almost all of the 500k job losses.  Again, that's a guess.  If someone has real numbers, i would like to see them. 

PaulDirks
PaulDirks

@reallife @Irony  The 'answer" is that it's a moronic premise. but then again, we've grown quite used to that by now.



reallife
reallife

@grape_crush @manlyman  why just a couple of dollars over $10? what about the people making $15? should they get a raise also? and when the owner raises the price of a hamburger, what if "they" can't afford it? do they get a "happy meal" subsidy from the government also? or "they" just don't get to eat hamburgers like the rest of us? 


grape_crush
grape_crush

@manlyman@grape_crush  > Your replacement will be a machine.

That's happening independently of whatever the minimum wage is, scaredyman.

> Let's raise the minimum wage to ten, and tell the guy who's already making ten to STFU.
If the employee is valuable enough to pay 10 bucks an hour when everyone else is getting paid 7.25, then they're valuable enough to pay a couple dollars over 10.

If the owner or manager are too greedy or cheap to understand this, then they don't deserve having good employees.

manlyman
manlyman

@grape_crush Let's raise the minimum wage to ten, and tell the guy who's already making ten to STFU.

Let us know how that works out.

manlyman
manlyman

@grape_crush Go ahead and raise that minimum wage.

Your replacement will be a machine.

grape_crush
grape_crush

@manlyman@PaulDirks@reallife  > show someone else how to do it, (they call that promotion)

No, they don't call training fellow coworkers 'promotion'.

In some places, they call that 'getting your replacement ready to replace you'.

manlyman
manlyman

@PaulDirks @manlyman @reallife Again, if after flipping a thousand burgers you still haven't gottten the hang of it to the point where you can show someone else how to do it, (they call that promotion) Id say your problem runs a bit deeper than the amount of your hourly wage.

PaulDirks
PaulDirks

@manlyman @PaulDirks @reallife  Again, if you're working full time, then you should be making enough to have a family. if not, then our vaunted 'Free Market" is driving people into misery.


mantisdragon91
mantisdragon91

@manlyman @PaulDirks@reallifeThen allow people access to contraception and abortion. Seeing as the entire conservative platform is built around denying women to right of choice, and STFU may be in order.

mantisdragon91
mantisdragon91

@reallife Curiously its the GOP that destroys unions and weakens workplace safety regulations.