The Congressional Budget Office released a report today concluding that the Democrats' proposal to raise the minimum wage would reduce poverty, but could also cost the economy jobs—ranging from a "very slight decrease" in employment to up to 1 million positions lost.
By hiking the minimum wage from its current level of $7.25 to $10.10, and pegging the minimum pay to inflation, the proposal would raise the country's collective wages by $31 billion and lift perhaps 900,000 people out of poverty, according to the CBO study. But the authors found that the measure would also likely eliminate an unknown number of jobs.
Over the years, economists have produced reams of studies with data that either supports or disputes the wisdom of a minimum wage hike -- and often does both -- and the debate tends to fall along predictable political lines. The CBO report merely adds to an already large body of research, but its forecast of job loss may make it more advantageous to Republicans than Democrats in the ongoing discussion.
When discussing this on CNN's Crossfire today, the Democratic ex-Governor from Vermont, Howard Dean, was arguing for raising the minimum wage, but then he also agreed with the opposing view, saying "Yes, some people were paid too much, and that's why their jobs went to China." (A blatant attack on union workers. Maybe Howard Dean is also paid too much.)
Christine Owens of the National Employment Law Project said, "Today’s Congressional Budget Office report is an outlier that flies in the face of overwhelming empirical evidence. The effect of raising the minimum wage is one of the most thoroughly studied topics in modern economics, and the vast majority of the more than 1,000 estimates contained in studies dating back to 1972 show no significant adverse effects on employment."
The office of Rep. George Miller (D-Calif.), who sponsored the House bill, criticized the CBO for its "institutional" view that minimum wage raises lead to job loss. Miller's office noted that 600 economists, including seven Nobel Prize winners, signed a letter last month supporting the Democrats' proposal, and said that the projected drop in poverty shows the proposal's true benefits.
"While CBO has reproduced an outdated view of the employment effects of the minimum wage, this report’s findings on poverty reduction add to the forward momentum created by more than 600 economists, savvy businesses across the country, and millions of hard-working American families who understand that a wage increase will boost the economy," Miller said in a statement.A new gallop poll shows that unemployment is the #1 problem for Americans:
And while the jobless rate fell last month, the drop was due in large part to the long-term unemployed giving up on looking for work. "Some of this is due to the fact that Baby Boomers retiring -- but only some," HuffPost's Mark Gongloff wrote last month. "Most of it has to do with the fact that the economy is still too weak to create enough jobs to draw people into the market. This is most clearly evident in the fact that younger people are leaving the labor force, too -- or never even entering it -- because they can't find jobs."