Study Finds Conflicting Answers On Raising Minimum Wage
The Equity Factor

Study Finds Conflicting Answers On Raising Minimum Wage

A new report from the Congressional Budget Office finds that while raising the minimum wage might lead to a reduction in jobs, it could lift many families out of poverty.

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Raising the minimum wage will kill jobs, detractors say. But it will lift thousands of Americans out of poverty! Advocates shout. Turns out, they both might be right.

A report released yesterday by the Congressional Budget Office (CBO) explored the impact raising the minimum wage to $10.10 an hour — something President Obama has advocated — would have on employment and poverty. And, well, it provides both sides of the fight dinner party talking points.

Raising the minimum wage would increase the income of 16.5 million American workers and, the study finds, lift 900,000 families out of poverty. On the flipside, it could lead to a loss of 500,000 jobs, which is not to be taken lightly. That would be a roughly .3 percent increase in unemployment.

These are all based off the $10.10 proposed wage hike. The CBO also ran the numbers for a $9 an hour wage hike, which would have far less measurable effects, only reducing employment by 100,000 workers and lifting just 300,000 families about the poverty line.

Raising the minimum wage to $10.10 an hour could also result in two things. First, consumers might see an uptick in prices as a result of increased labor costs. And some businesses might seek out more automated systems and high-tech machinery as a cheaper alternative to labor.

Republicans held the party line here, which is basically: Let’s Not Raise the Minimum Wage, Because We Are Very Worried About Jobs. House Speaker John Boehner’s spokesman Brendan Buck had this to say to the New York Times:

This report confirms what we’ve long known. While helping some, mandating higher wages has real costs, including fewer people working. With unemployment Americans’ top concern, our focus should be creating — not destroying — jobs for those who need them most.

That’s a pretty flimsy argument: Don’t raise the measly wage, it’ll destroy America. While raising the minimum wage might put a dent in the modest employment gains we’ve made — remember, this is an assessment from the CBO to be taken with a huge grain of salt, it’s not gospel — it’s almost unanimously agreed on that raising minimum wage will reduce poverty.

The focus here is on low-wage earners, but raising the minimum wage will also affect high-wage earners, who will see a modest hike in opportunities. “Some employers respond by reducing their use of low-wage workers and shifting toward those other inputs. That is known as a substitution effect, and it reduces employment among low-wage workers but increases it among higher-wage workers,” the CBO writes. So while it would redistribute some income to the working poor, it would also rearrange some of the deck chairs on the Titanic by eliminating some low-wage jobs and creating more high-wage gigs.

The Equity Factor is made possible with the support of the Surdna Foundation.

Bill Bradley is a writer and reporter living in Brooklyn. His work has appeared in Deadspin, GQ, and Vanity Fair, among others.

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Tags: jobspovertyequity factorbudgetsminimum wage

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