Wednesday, February 19, 2014


The Congressional Budget Office has now told us what it believes would be the effect of increasing the minimum wage to levels currently being proposed:
A popular Democratic proposal to raise the minimum wage to $10.10 an hour, championed by President Obama, could reduce total employment by 500,000 workers by the second half of 2016. But it would also lift 900,000 families out of poverty and increase the incomes of 16.5 million low-wage workers in an average week....

Republicans contended the policy would be a job-killer, while Democrats asserted it would help alleviate poverty. Economists said both might be right....

The second proposal would increase the minimum wage to $9, without any indexing for inflation. That would have much smaller effects, the budget office found. It would reduce employment by 100,000 workers by the second half of 2016, and push about 300,000 people above the poverty line....
Overall real income would increase by $2 billion under the $10.10 plan, and would increase by $1 billion under the $9.00 plan, according to the CBO. Far more people would gain than would lose.

But we shouldn't do it, according to conservatives, because some people would lose jobs, or not be hired.

By that rationale, we should never raise the minimum wage -- not now, not a year from now, not a decade from now, not a hundred years from now. We should keep the minimum wage exactly where it is for all eternity, until its real purchasing power is the equivalent of a contemporary Third World wage, because it will always motivate a certain number of employers to fire or not hire.

The CBO was created in 1974. What would the CBO have concluded about the economic effects of abolishing slavery? What would the CBO have said about the effect on employers' willingness to hire of the Pure Food and Drug Act, or laws limiting child labor, or the original minimum wage, or Social Security, or Medicare?

I know the labor impacts of these laws were understood and discussed when they were under consideration. If I were an economist, I'm sure I could direct you to the relevant analyses. The point is that we didn't reject these laws because somebody somewhere might lose a job. We weighed the pros and cons.

If we want to create the optimal conditions to motivate our precious job creators to create jobs, I suppose what we need to do is repeal the Great Society, the New Deal, and the Progressive Era.

Which, as I understand it, is exactly what the right-wingers crowing about this CBO report would like us to do.


Victor said...

Yes, finally, the CBO is 100% right!

Raising the minimum wage will kill jobs.

You know, all of those beautiful jobs that our time-tested "Trickle-down Economics" rained down upon the people for the last 30+ years.

Republicans pick and choose which CBO results they "believe" and support, and which ones they'll claim are BS.

aimai said...

I wonder about the validity of the number in the first place, given that the ACA is supposed to "cost jobs" because it allows people to choose to work less. I can well imagine someone holding down two below minimum wage jobs shifting to full time employment at a new, higher, minimum wage job.

Its also patently obvious that the "cost" of the new higher minimum doesn't have to come out of labor costs at all but rather out of profits. If you need the productive capacity of worker X at 9 dollars an hour you still need it at 10.00 dollars an hour. If your profit margins are so low that you can't manage to pay your workers a few cents more an hour you are doing capitalism wrong. You might prefer to keep all the moneez to yourself, but its a choice, not a necessity.

What we should do is outlaw part time jobs or force employers to register part time workers and pay them time and a half for every hour overtime they actually work. We should move towards encouraging employers, through tax penalties and incentives, to pay full time workers a living wage and stop trying to nickle and dime workers to death.

If we had full employment at a living wage a lot of people could stop taking on half time work for little money just to make ends meet. Those jobs wouldn't disappear--they would be filled by other full time workers. Since we have a labor oversupply known as an unemployment problem there is no way that those jobs go unfilled.

Jules said...

I wonder how long it will take some right wing genius to argue that based on the CBO's findings, we should drop or eliminate the minimum wage because that will create more jobs.

If they weren't such hypocritical hacks I'd be shocked they are hostile to the MW. It was originally created to allow one man to support a wife and a couple of pups. You know, family values and all that.

Uncle Mike said...

Julia, I think Michele Bachman actually suggested that a while ago. Her reasoning was that, if we abolished minimum wage, we could get unemployment to 0%, because every business could hire tons of people (even if some of them would be making teeny tiny amounts).

Philo Vaihinger said...

Without a doubt, slavery held labor costs down.

Else what would be the point?

Jules said...

I should not have doubted Uncle Mike, but I had to check.

(2) BACHMANN CLAIMED ABOLISHING THE MINIMUM WAGE WOULD CREATE JOBS: While testifying in front of the Minnesota Senate in 2005, Bachmann said, “Literally, if we took away the minimum wage — if conceivably it was gone — we could potentially virtually wipe out unemployment completely because we would be able to offer jobs at whatever level.” This isn’t remotely true. Even simply reducing the minimum wage would, as Paul Krugman noted, “at best do nothing for employment; more likely it would actually be contractionary.”

The Republican belief that people should work for the sake of working is one of the many traits that endears them to the general public.

mervis said...

We're talking an $8.00 a day difference there -- about S2,000 a year. You wouldn't hire someone on unless that employee was going to make you a lot more than that in extra business potential and therefore more revenue.

So that extra dollar an hour might take a tiny slice out of your profits, but you'd be helping the economy. Which would, if you are a good businessperson, benefit you in the long run.

What happened to vision?