The Congressional Budget Office released a report on the economic effects of increasing the minimum wage from its present $7.25 per hour to $10.10. That increase is being proposed by President Obama and the Democrats. It’s a favorite tactic of the left to push for minimum wage hikes, as it makes for positive headlines for them while cornering some Republicans who oppose the government-mandated hike.
The minimum wage only directly impacts about 4.7% of the American hourly paid work force. Most Americans who start out making the minimum wage end up getting raises or other jobs that offer higher wages before too long.
The CBO looked at two options: raise the minimum wage in three steps to $10.10 by 2016, or raise it in two steps to $9.00 by 2016.
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 (see the table below). 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.
So, the U.S. economy would either lose a few jobs or a whole lot of jobs.
The CBO does find one positive impact: Raising the minimum wage would move some 900,000 Americans out of poverty.
But that would come at the cost of potentially sending a million workers out of jobs altogether. That’s hardly the goal that Obama and the Democrats are selling.
The CBO also finds this:
CBO concludes that the net effect on the federal budget of raising the minimum wage would probably be a small decrease in budget deficits for several years but a small increase in budget deficits thereafter.
Somewhere, minimum-wage hike enthusiast (and former Enron adviser) Paul Krugman is kicking a cat off a 30-story building.