President Obama’s proposal to raise the minimum wage to $10.10 an hour would increase earnings for 16.5 million low-wage Americans but cost the nation about 500,000 jobs, congressional budget analysts said Tuesday.
About 15 percent of the nation’s workforce would see wages rise under the proposal, according to the report from the nonpartisan Congressional Budget Office. In addition to the 16.5 million people who earn less than $10.10 an hour, as many as 8 million workers whose earnings hover above that level could also benefit, the report said.
The higher wages would lift about 900,000 people out of poverty, the report said.
But the CBO warned that raising the minimum wage could also cause employers to lay off low-wage workers or hire fewer of them, reducing overall employment by about 500,000 jobs, or about 0.3 percent of the labor force. The CBO acknowledged that its calculation is an estimate and said actual job losses could range from “very slight” to as many as 1 million positions.
Two things we see here that we always see:
1. If you increase the price of something, you get less of it, whether we're talking about cars, food at the supermarket or entry-level workers.
2. Any government action creates winners and losers. The winners here are some entry-level workers who will get higher salaries, benefiting at the expense of other entry-level workers who will lose their entire salaries. (The losers also include the consumers who will pay the higher prices charged by the companies forced to increase their payroll costs.)
Now, we can argue whether, on balance, the net gain to the winners is more than the net loss to the losers and if society as a result is better off, but we cannot deny that the tradeoff exists.
Oh, wait. Apparently we can:
A top White House economist says that President Obama’s minimum wage increase will have “zero effect” on employment, despite a CBO report that the proposed hike would likely eliminate 500,000 jobs.
“Our view is that zero is a perfectly reasonable estimate of the impact of raising the minimum wage on employment,” Council of Economic Advisers chairman Jason Furman said on a conference call with reporters shortly after the report came out.
Furman said the CBO was out-of-step with the White House’s views on the proposed 40 percent hike, though he praised the report for highlighting wage boosts that will accompany the hike.
Give America a raise! It won't cost anything! Dang. This is twice in recent days the CBO has been "out of step" with the White House. Starting to like them a little more.