Sperling: We Disagree with CBO on Job Losses Because of Our New Jersey Fast-Food Study
February 19, 2014 - 8:41 am
The director of President Obama’s National Economic Council said the White House just flat-out disagrees with the Congressional Budget Office finding that raising the minimum wage would cost jobs.
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.
Gene Sperling told MSNBC that they instead want to focus on “the primary thing in which we agree with them on and which everybody should agree, which is 16.5 million people would be getting a direct raise.”
“On jobs, you know, this is an area where I’d say we respectfully disagree with the CBO, though we have enormous admiration for the institution and their professionalism,” he said.
“But here is why. This is actually an area where economists have done very interesting, easy to understand research. They look and say, this was the first research done like this, Alan Krueger and David Carr did this, they looked at New Jersey when New Jersey raised the minimum wage and they said, ‘Wow, it’s on the border with Pennsylvania, so we can actually look and say did fast food restaurants in New Jersey, right on the border where they raised wages, did they lose more jobs than in Pennsylvania where wages stayed lower?’ And what they found was, not at all. There was no negative job impact.”
So based on that New Jersey-Pennsylvania burger study, Sperling says the CBO got it wrong.
“People are taught in Economics 101 that, you know, if price goes up there must be a little less supply and I think their mistake was not looking at the practical research that was done because then economists looked at 500 counties where there was this, you know, one state raised the minimum wage and on the other side of the county they did not, and all of them, they found that raised wages and that it did not hurt jobs,” he continued. “But it’s interesting to understand why, because there’s things you learn about human behavior when you actually study it as opposed to just look theoretically.”
“And let me just ask a question to those who want to criticize, we are about — we are less — we’re about where we were in the minimum wage as we were 50 years ago. So think about that, 50 years ago. That would be 1964. Can you imagine people in 1964 saying we can’t have a better minimum wage than we did in 1914 before World War I? So you’re telling me that 50 years later, we as a country haven’t improved our standard of living enough for people who are working hard so that we can say if you work full-time in the United States of America, and this is very important to the president’s heart, if you work full-time in the United States of America you should not have to raise your children in poverty.”
The CBO 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.
“People would say — basic economic theory would say that if you have to pay more for a worker, you might hire less workers,” Sperling said. “I’m sure they looked at the evidence but what I’m saying is that we as a country can afford to give people minimum wage.”
Always fun to watch folks cherry pick CBO reports. CBO=Choose Best Output to back your argument. Overall, tho, min wage hike nets out well.
— David Axelrod (@davidaxelrod) February 19, 2014