CBO: Minimum wage hike would cost 500,000 jobs

An ever-increasing federal minimum wage is a statist panacea. Even Mitt Romney supported tying it to inflation in the 2012 campaign. But the CBO on Tuesday released its report scoring the proposals, and the numbers aren’t good.

If the minimum wage were raised on $10.10, as the Obama administration has proposed, somewhere between 500,000 and 1 million jobs could be lost over the next two years:

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 worker

Economists and politicians have debated for decades about the minimum wage’s effect on employment, but the non-partisan government calculator has spit out a decisively negative result, at least for employment.


Adding more salt to the wound, the CBO finds that raising the minimum wage also won’t be the immediate fix for poverty that many thing it would:

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.

More people in the middle-class would benefit than people under the poverty level. This is largely because people who make minimum wage tend to be young, just starting their careers, working second jobs, or teenagers still living with their parents. The leftist portrait of families barely scraping by one minimum wage salary at McDonald’s, while a rare exception, does not at all reflect reality.

However, the news isn’t all bad for the poor (unless you’re one of the 500,000 who lose your job, of course). An estimated 16.5 million would see their incomes rise by a total of $31 billion over the two years, meaning an average of just under $1,000 per employee per year.

As the CBO estimates it, the real story of raising the minimum wage is a fix for income inequality. While it would increase incomes for those making under the poverty level up to 3x that level, it would decrease net income for everyone making six times over the poverty level by $17 billion.


The “rising tide” in this case also comes with a lowered ceiling.

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