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The PJ Tatler

by
Bridget Johnson

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February 18, 2014 - 1:20 pm

The White House lauded a Congressional Budget Office report on the proposed minimum wage hike to $10.10 per hour while brushing off one key finding: that such a bill could cost half a million jobs, and maybe more.

“The new Congressional Budget Office (CBO) report finds that 16.5 million workers would get a raise from increasing the minimum wage to $10.10 per hour and this would help millions of hard-working families, reduce poverty, and increase the overall wages going to lower-income households,” Jason Furman, chairman of the Council of Economic Advisers, and Betsey Stevenson, Council of Economic Advisers member, wrote in a White House blog post this afternoon.

“On employment, CBO’s central estimate is that raising the minimum wage to $10.10 per hour would lead to a 0.3 percent decrease in employment and CBO acknowledges that the employment impact could be essentially zero,” they continued. “But even these estimates do not reflect the overall consensus view of economists which is that raising the minimum wage has little or no negative effect on employment. For example, seven Nobel Prize winners and more than 600 other economists recently stated that: ‘In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market.’”

The CBO report says that “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,” the report adds.

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The report also found that the maximum impact from a minimum wage hike would not be felt by families below the poverty line.

“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,” the report states.

“Once the increases and decreases in income for all workers are taken into account, overall real income would rise by $2 billion. Real income would increase, on net, by $5 billion for families whose income will be below the poverty threshold under current law, boosting their average family income by about 3 percent and moving about 900,000 people, on net, above the poverty threshold (out of the roughly 45 million people who are projected to be below that threshold under current law).”

“Opponents claim raising the minimum wage won’t reduce poverty, but that is not the case, as many American who work full time are unable to make ends meet. This finding echoes the broad consensus of academic studies on the topic, which is nearly unanimous in finding that increases in the minimum wage reduce poverty,” Furman and Stevenson wrote for the White House.

“Overall the logic for the finding that raising the minimum wage does not result in large adverse impacts on employment is that paying workers a better wage can improve productivity and thereby reduce unit labor costs. These adjustments, along with others that firms can make, help explain why the increase in the minimum wage need not lead to a reduction in employment. Higher wages lead to lower turnover, reducing the amount employers must spend recruiting and training new employees. Paying workers more can also improve motivation, morale, focus, and health, all of which can make workers more productive. In addition, by reducing absenteeism, higher wages can increase the productivity of coworkers who depend on each other or work in teams. In addition, businesses can adjust in other ways rather than reducing employment (for example, by accepting lower profit margins). CBO’s estimates do not appear to fully reflect the increased emphasis on all of these factors from the recent economics literature.”

Bridget Johnson is a veteran journalist whose news articles and opinion columns have run in dozens of news outlets across the globe. Bridget first came to Washington to be online editor at The Hill, where she wrote The World from The Hill column on foreign policy. Previously she was an opinion writer and editorial board member at the Rocky Mountain News and nation/world news columnist at the Los Angeles Daily News. She is an NPR contributor and has contributed to USA Today, The Wall Street Journal, National Review Online, Politico and more, and has myriad television and radio credits as a commentator. Bridget is Washington Editor for PJ Media.

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Top Rated Comments   
... if they could accept lower profit margins, they would have already to steal customers from their competition.


Ivory Tower idiots. All of them.
40 weeks ago
40 weeks ago Link To Comment
Whoever came to those conclusions never ran a business. Higher pay does motivate people to be better workers, more dependable, etc. But that's cause they earn the higher pay. Getting more money for doing nothing different isnt going to motivate anyone. And what about the good workers who did climb out of minimum wage? Suddenly all the slackers are making the same thing? What does that do for those peoples motivation.
40 weeks ago
40 weeks ago Link To Comment
"Employers Can Prevent Job Losses After Minimum Wage Hike by ‘Accepting Lower Profit Margins’"

Government can prevent job losses by accepting less regulation and lower spending.
40 weeks ago
40 weeks ago Link To Comment
All Comments   (55)
All Comments   (55)
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ivy league educated idiots + common sense=a complete oxymoron
40 weeks ago
40 weeks ago Link To Comment
My last year of being an Employee paid over 50K plus benefits, 401K and zero risk.
As an Owner, for 15 years, I have never made that much. Not even close.
And there is no safety net for me. No Unemployment. Nothing.
Ya want me to take the hit???
No.
The only two I provide jobs for can go live on Unemployment or Welfare.
Or starve. This is self-preservation.
I have babies to feed.
40 weeks ago
40 weeks ago Link To Comment
Employers Can Prevent Job Losses After Minimum Wage Hike by ‘Accepting Lower Profit Margins’

This idiot clearly does NOT understand what creates a job in the first place.

The key to creating jobs that pay well is investment. There is a direct correlation between the number of well paying jobs created in a certain pay bracket to incoming investment.

If a company all of a sudden has lower profit margins then there's a strong disincentive for other investors to invest in said company due to diminished profit potential. The lack of investors and their investments will directly result in fewer jobs.
40 weeks ago
40 weeks ago Link To Comment
and love that in all this talk about minimum wage, has anyone discussed different costs of living in different cities. $10/hour in Cleveland can get you a house with a mortgage, but not in L.A or San Francisco.

So maybe this blanket talk of minimum wage should be targeted to specific cities, and let's put a lot of businesses out of business by telling them they should absorb losses , or maybe they can do like the government, and just print the money they need.
40 weeks ago
40 weeks ago Link To Comment
how do 16.5 million people get a raise, when reports are that only 3.3 Million people are paid minimum wage??????? Anyone ask that questions??????


http://townhall.com/columnists/terryjeffrey/2014/02/19/minimum-wage-hike-attacks-young-and-industrious-n1796979--Who is targeted by this assault on free enterprise? Industrious young people -- those who, historically, have been on their way up in America -- and the entrepreneurs who employ them. On average, according to the Bureau of Labor Statistics, 143,929,000 people were employed in the United States in 2013. Of these, 75,948,000 were paid an hourly wage, and 3,300,000 of those earned at or below the minimum wage. That means only 2.3 percent of American workers earned at or below the minimum wage.
40 weeks ago
40 weeks ago Link To Comment
I'm shocked at much of the stupidity in this.

Start with the statement that "paying workers a better wage can improve productivity and thereby reduce unit labor costs". If you change what minimum wage is and continue paying that worker minimum wage, he KNOWS he is still making minimum wage, which destroys the incentive to increase productivity. That worker hasn't been shown that increased productivity will increase his wages. He has been shown that voting Democrat increases his wages.

"Higher wages lead to lower turnover, reducing the amount employers must spend recruiting and training new employees." Only when the employee doesn't choose to leave for an equal minimum wage job or accept the disincentive to work that is Obamacare. Turnover happens because employees either find a reason to quit or are useless enough that finding someone else is a better option for the employer. Unless they also make being unemployed more unpleasant (which they are not) then turnover is going to remain constant.

"Paying workers more can also improve motivation, morale, focus, and health, all of which can make workers more productive. In addition, by reducing absenteeism, higher wages can increase the productivity of coworkers who depend on each other or work in teams." This all leaves out the important factor that the minimum wage employee knows they're still at the minimum wage. It's like giving everyone in McDonald's the title of Assistant Manager, or everyone in the bank Vice President. Changes that are given to everyone and not EARNED don't improve motivation, morale, or focus. If there is not inflation to match, then claiming improved health is possible, but since every company's labor cost goes up, prices all go up.

"In addition, businesses can adjust in other ways rather than reducing employment (for example, by accepting lower profit margins)." No company is going to choose to reduce profit margins. If the Democrats could legislate profit margins as they are doing with health care, they would. Perhaps that is the true genesis of this command-economy loving group?

All the studies that show wage increases resulting in good things are based on merit increases, not on legislating increased wages for everyone.
40 weeks ago
40 weeks ago Link To Comment
This is proof positive that Obama does not look out for the little guy. Taking a lower profit margin can only help the large companies and will force the little guy out because he cannot absorb it.Please pay attention and use common sense.
40 weeks ago
40 weeks ago Link To Comment
common sense and business acumen to liberals, is similar to garlic to a vampire or pork to a muslim.
40 weeks ago
40 weeks ago Link To Comment
Do they ever get a random group of business owners and finance managers together and run their bright ideas past them before making stupid announcements?
40 weeks ago
40 weeks ago Link To Comment
David IV, the administration's business partners are all rent seekers. They see the administration's business policies as ways to reduce competition and pad their own profit margins. The icky productive business people who actually earn their revenues are too busy for this nonsense and are anathema to Obama and his ilk and his kith and his kin.
NTIAB.
40 weeks ago
40 weeks ago Link To Comment
[M]any American who work full time are unable to make ends meet.

Is there such a thing as a minimum wage earner that works full time?

All the minimum wage earners I know are part time workers since being Full Time triggers requirements that the employers provide benefits.
40 weeks ago
40 weeks ago Link To Comment
Howdy S281
It's a big country with a lot of business models operating. I'm sure a small portion of minimum wage workers are full-time and even have spouse and/or children dependent on them. But they are waaaay outliers, as you said.
A less-recognized effect of minimum wage, but more important probably than its first order affects, is the pressure it puts on all wages below about minimum+20%. Many employers who operate a little above minimum wage -- today's $9.80-10.50 range, say -- will either raise wages to about the same margin above minimum wage or let the minimum catch their lowest employees. Problems with both of those outcomes.
The real way to improve the standard of living for the poorest Americans -- the poor everywhere -- is to make goods and services less costly to begin with. A minimum-wage worker is better off if the cost of milk comes down than if her wages are raised by fiat and the cost of milk follows -- and that's what always, always happens.
40 weeks ago
40 weeks ago Link To Comment
Because every business owner opens a business solely to provide jobs for the community right? Hey Obama (and democrat sheep who think this is a good idea), get a clue, then get a job, then maybe you'll learn something for once instead of thinking you already know everything.
40 weeks ago
40 weeks ago Link To Comment
There are a few who do things like start a business to help the community, but they already have their profit margins and wages figured to do so. They can't just change business models without restructuring (which may mean firing employs).
40 weeks ago
40 weeks ago Link To Comment
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