Spin Aside, CBO Report Favorable to Increasing Minimum Wage
By Lori Pfingst and Ben Secord --Yesterday, the Congressional Budget Office (CBO) released a report examining the potential impact of raising the federal minimum wage from its current level of $7.25 to $10.10 over a three year period. The report largely substantiates growing consensus among economists – that raising the minimum wage would provide a much needed boost to the paychecks of millions of low- to moderate-wage workers across the country.
The concrete benefits of raising the minimum wage in the report, however, have been overshadowed by the far less concrete and imprecise estimates of the impact on employment. The benefits of the increase far exceed the costs, and the CBO findings lend additional support to increasing the federal minimum wage.
Two major conclusions from the report include:
- 98 percent of workers impacted would benefit from proposal. The report found that more than 24 million Americans would get more take home pay if the minimum wage was increased to $10.10. Overall the policy would result in a small, but significant decrease in poverty, and would slightly reduce income inequality.
- The potential impact on employment is imprecise, and a sharp departure from what we know about the actual impact of increasing the minimum wage. The CBO report estimated the impact of raising the federal minimum wage on jobs to be as low as zero, and up to one million jobs lost. Such an imprecise, and wide-ranging estimate of the potential impact on employment is wholly inconsistent with a robust economic literature that overwhelmingly shows actual minimum wage increases at the federal, state, and city level have little, if any impact on employment. The weight of the evidence is so great, in fact, that 600 economists recently urged President Obama to raise the minimum wage.
Even under the worst case scenario in the report, workers win, and the findings are consistent with what we already know about raising the minimum wage – that it is a smart policy and should be part of a broader strategy to provide economic security to workers and their families.