Budget office: Wage hike would lift pay, cost jobs

Published on NewsOK Modified: February 18, 2014 at 4:36 pm •  Published: February 18, 2014

WASHINGTON (AP) — Boosting the federal minimum wage as President Barack Obama and congressional Democrats are proposing would increase earnings for more than 16.5 million people by 2016 but also cut employment by roughly 500,000 jobs, Congress' nonpartisan budget analyst said Tuesday.

In a report containing ammunition for both supporters and opponents of the Democratic election-year proposal, the Congressional Budget Office said gradually raising the minimum from $7.25 hourly to $10.10 would lift 900,000 people above the federal poverty level by 2016. That is out of 45 million who would otherwise live in poverty without an increase.

But the analysis also noted a downside: About 0.3 percent fewer jobs, especially for low-income workers; higher costs for business owners and higher prices for consumers.

The study was unveiled as the Senate prepares for a March debate on a plan by Sen. Tom Harkin, D-Iowa, ramping up the minimum in three steps to $10.10 by 2016. The proposal is backed by Obama and is a keystone of Democrats' campaign-season plans to highlight their effort to make incomes more equitable, but it faces strong Republican opposition and long odds of approval by Congress.

The analysis, which examined increases very similar to Harkin's, immediately added fuel to the partisan dispute over the proposal. It put authoritative weight behind longtime GOP claims that increasing the minimum wage would cost jobs by forcing companies to spend more on wages, putting Democrats on the defensive.

"This report confirms what we've long known: While helping some, mandating higher wages has real costs, including fewer people working," said Brendan Buck, spokesman for House Speaker John Boehner, R-Ohio. "With unemployment Americans' top concern, our focus should be creating — not destroying — jobs for those who need them most."

The budget office said its estimate of employment losses was approximate. It said the actual impact would likely range from a very slight employment reduction to a loss of 1 million workers.

"If and when Democrats try to push this irresponsible proposal, they should be prepared to explain why up to a million Americans should be kept from having a job — beyond the work already lost due to Obamacare," said Senate Minority Leader Mitch McConnell, R-Ky., using a favorite nickname of the GOP's favorite election-year target — Obama's 2010 health care overhaul.

Democrats cited other studies that they said concluded employment would not be reduced. They said job-reduction claims are overblown and outweighed by the benefits to workers and the overall economy as low-paid employees use their higher incomes to spend more money.

The CBO job-loss figures "do not reflect the overall consensus view of economists which is that raising the minimum wage has little or no negative effect on employment," Jason Furman, chairman of the White House's Council of Economic Advisers, said in a blog post with council member Betsey Stevenson. Instead, they emphasized the millions who would gain higher wages and the 900,000 boosted above poverty.