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Labor Secretary Disputes CBO Report that Predicts Fewer Jobs After Minimum Wage Hike

The CBO report says an increase in the minimum wage would substantially boost income for most low-income workers. Nevertheless, those earnings would not go only to low-income families because many low-wage workers are not members of low-income families. Only about one-fifth of the $31 billion in total increased earnings would go to families with incomes below the poverty threshold.

CBO Director Doug Elmendorf told the committee the minimum wage hike would have two effects: most workers would receive higher pay, and some jobs may be eliminated.

He noted this is the “central estimate,” meaning there is a two-thirds probability that the change would create anywhere from a slight reduction in employment to a loss of one million jobs.

“It could be smaller job loss, it could be larger job loss,” Elmendorf said.

He said that nearly one-third of the families that would benefit from the minimum wage hike already earn more than three times the poverty level.

Sen. Elizabeth Warren (D-Mass.) noted that CBO’s report is a “meta-study” that collected hundreds of studies and weighted its findings to come up with an overall estimate of the impact of a minimum wage increase on employment. She said the Center for Economic Policy Research examined every study since 2000 on the effects of the minimum wage and employment and concluded that an increase in the minimum wage has no impact on jobs.

The White House has also criticized the report, saying the job loss estimates were overstated.

According to the White House’s estimates, the wage hike would lift two million workers above the poverty line.

The issue is likely to feature prominently in the 2014 midterm elections as the Democrats try to counter Republican messaging on problems with Obamacare.

President Obama called for an increase in the minimum wage during his State of the Union address. He has made the minimum wage boost a central part of his larger effort to reduce income inequality.

Obama signed an executive order in February that would increase the minimum wage for federal contractors to $10.10 an hour.

On Thursday, Obama ordered the Department of Labor to propose rules that expand the number of employees who benefit from overtime pay. The rules would be aimed at salaried workers who make more than $455 a week and those who are ineligible for overtime pay because they are designated as management.

“Overtime is a pretty simple idea,” Obama said. “If you have to work more, you should get paid more.”