CBO: Raising the minimum wage to $10.10 an hour could eliminate 500,000 jobs by 2016
posted at 3:21 pm on February 18, 2014 by Allahpundit
There’s no problem here that indefinite unemployment benefits can’t solve, my friends.
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…
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.
Moreover, the increased earnings for some workers would be accompanied by reductions in real (inflation-adjusted) income for the people who became jobless because of the minimum-wage increase, for business owners, and for consumers facing higher prices.
So more than 80 percent of the gains in earnings will go to people other than the very poorest, and meanwhile as many as a million people potentially could end up being laid off. When you net out all the income created and lost by this disruption, says CBO, you come up with a modest gain of $2 billion, or about what the feds spend in four hours on a given day. AEI’s Michael Strain visualizes the trade-off this way:
And as icing on the cake, per CBO, while hiking the minimum wage would reduce deficits slightly in the near term, it would have the opposite effect as the timeline gets farther out. I realize there’s an apples-and-oranges element in comparing this to workers voluntarily leaving the labor force under ObamaCare, but put the two together and we’re now looking at three million jobs disappearing from Obama initiatives on top of the many millions that disappeared over the past five years during and after the recession. What exactly is our employment target at this point?