Pethokoukis

CBO: The $10.10 minimum wage would cost 500,000 jobs, with most benefits going to non-poor

021814minwage

The CBO on a $10.10 minimum wage:

Once fully implemented in the second half of 2016, the $10.10 option would reduce total employment by about 500,000 workers, or 0.3 percent, CBO projects. As with any such estimates, however, the actual losses could be smaller or larger; in CBO’s assessment, there is about a two-thirds chance that the effect would be in the range between a very slight reduction in employment and a reduction in employment of 1.0 million workers.

Many more low-wage workers would see an increase in their earnings. Of those workers who will earn up to $10.10 under current law, most—about 16.5 million, according to CBO’s estimates—would have higher earn- ings during an average week in the second half of 2016 if the $10.10 option was implemented. 1 Some of the people earning slightly more than $10.10 would also have higher earnings under that option, for reasons discussed below. 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.

The increased earnings for low-wage workers resulting  from the higher minimum wage would total $31 billion, by CBO’s estimate. However, those earnings would not  go only to low-income families, because many low-wage  workers are not members of low-income families. Just  19 percent of the $31 billion would accrue to families  with earnings below the poverty threshold, whereas  29 percent would accrue to families earning more than three times the poverty threshold, CBO estimates. Moreover, the increased earnings for some workers would  be accompanied by reductions in real (inflation-adjusted)  income for the people who became jobless because of the  minimum-wage increase, for business owners, and for consumers facing higher prices.

So we lose maybe 500,000 jobs (the first rung for many on the upward mobility ladder) for an anti-poverty policy where half the benefits go to families whose income is three times the poverty threshold or more (see above chart). This does not sound like optimal anti-poverty policy to me, especially as compared to expanding the EITC and adding a wage subsidy.

Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.

15 thoughts on “CBO: The $10.10 minimum wage would cost 500,000 jobs, with most benefits going to non-poor

  1. The CBO does not know how many jobs will be lost from wage increases. Additionally, an employer tax credit equal to the increase wage/salary cost can be implemented. This was done thirty years ago with positive effect. Large companies already pay more than this amount and will not be affected.

    • Additionally, an employer tax credit equal to the increase wage/salary cost can be implemented“…

      Are you going to foot that bill – that so called credit has to come from somewhere…

      This was done thirty years ago with positive effect“…

      On what planet?

    • Yeah, it’s tough out there for young folks feeling the impact of Obama’s wrecking ball, ain’t it, Turd? Killing off yet more jobs with yet more government distortions is surely the way to fix everything.

    • As Paul points out, it seems that the brunt of Obamanomics stupidity is being borne by the young and clueless, which is nice. I’m sure many parents’ homes have nice basements, and are excellent places to while away the formative years of what should be a career.

      This can only help their employment prospects.

      Speaking of which, how are your adult children enjoying your basement, Turd?

  2. Still, the number of people earning the minimum wage in the United States is less than one-half the number of people collecting monthly “disability” payments from the VA.

    There are 3.7 million vets collecting “disability” to the raptly rising tune of $57 billion (in 2013), or about $15,405 per vet per year.

    Most counts of people at the statutory minimum wage put it at about 1.6 million.

    Astonishingly, the average vet on “disability” collects more money than a person working full-time makes earning the minimum wage, the worker earning about $14,500 a year, assuming zero vacation days.

    Moreover, the vet on “disability” collects his money for doing nothing, and direct from income taxes levied on productive citizens.

    The Pentagon reports about 150,000 vets have been injured in battle, since and including Vietnam.

    I think the minimum wage should be phased out—along with the VA’s dubious “disability” program.

    I doubt anyone at the AEI has the guts to even begin researching this topic of runaway VA spending, let alone trying to pare it back.

    • Welfare in General has exploded during your boyfriend’s regime, Benji, yet you only zero in on people who, unlike you, have actually served the country and/or who tend to vote conservative. Food stamp spending, for example, has exploded by 37% during the past 5 yrs to more than $79 billion last yr. Yet no complaints from you in your endless off-topic tirades. Odd because the program is administered by the USDA and represents about 80% of the dept’s budget. But You do constantly bitch and whine about the farmers approx 20%, either dishonestly or ignorantly representing their minority of spending as the entire USDA budget.

      Get some new material, or at least be honest about whatever topic you think we should be talking about but don’t because we lack the courage of Benji The Bold, The One True Libertarian/Conservative Amongst A Horde of Cowards and Poseurs.

      • Paul–
        Employees of the federal government “serve” their country? That’s funny…as a taxpayer I thought I served them…
        If you are drafted you serve in the military…otherwise you are an employee with powerful lobbies on your side…

        • Benji,

          You continue to hilariously demonstrate for everyone you haven’t a clue what it’s like to wear the country’s uniform. Your pittance in taxes is nothing compared to the sacrifices made by the soldier. Even the REMFiest clerk typist MOS would leave you crying for your mommy.

      • No doubt about it. Reagan spent 22.12% of GDP during his first 5 years in office. Likewise, Obama spent 22.80%. It’s a supernova I tell you.

    • WOW- Are you actually saying that a soldier injured in battle is not worthy of receiving the disability payment for losing a limb or suffering mental illness in connection with serving this country? I wouldn’t say he’s collecting his money for doing nothing. So are you saying that a person working full time making minimum wage should join the military- because if that’s your, point it would be correct. Joining the military develops skills and character that are valuable to an employer. If an unskilled worker is making minimum wage and working full time for more than a year, he should be on disability because he’s an idiot.

  3. “Moreover, the increased earnings for some workers would be accompanied by reductions in real (inflation-adjusted) income … for consumers facing higher prices.”

    The part of this issue that seems to be eluding all commentators is wage-driven inflation. What does it profit the worker if he receives a larger paycheck, but, because everyone else is also getting higher pay, everything he buys costs more?

  4. Increase the earned income credit if one wants to increase minimum wage workers income. That way the unskilled and new workers are not shut out of their first job. Unfortunately this takes real money rather than putting the burden on employers, consumers, and the newly unemployed.
    A few more of these “good ideas” from the left and we will have a job market as sclerotic and dysfunctional as Greece!

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