2-19-2014 – CBO Estimate Shows Minimum Wage is a Job Killer

by Shayne Spence

Not surprisingly, the Congressional Budget Office (CBO) released an estimate on February 18 that an increase in the minimum wage would be a job-killer.  Just how many jobs would it kill?  Up to 500,000, if the Congressional Democrats’ proposal of an increase to $10.10/hr is signed into law.  Even if the minimum wage was only raised to $9/hr, it would kill off up to 100,000 jobs.  Economists and politicians alike have squabbled for decades over what the effects of an ever-increasing minimum wage could be, but now the government’s own calculator is telling us it is a job killer.

Not to mention, it doesn’t even help the low-income people it strives to.  Of the 16.5 million people who would have their incomes increased by this proposal, only 900,000 would be lifted out of poverty, representing a miniscule 5%.  Assuming that none of those people were one of the 500,000 who lost their jobs, of course.

But that’s not all.  The majority of the increased wages wouldn’t go to workers in families below the poverty threshold, with those workers only accruing 19% of the total $31 billion increased earnings.  By contrast, 29% would accrue to families earning more than 3 times the poverty threshold.  This is because the majority of low-wage workers are not in low-income families.  This policy is a misguided one, and this CBO estimate proves that it will be a job killer.

However, Vermont lawmakers move inexorably onwards towards an increase on the state level.  Four bills contain such an increase (H. 433, H. 552, H. 770, S. 301), with a range of $12-15/hr.  No estimates exist on how these proposals would affect the Vermont economy, although one of the sponsors of H. 433, Susan Hatch Davis, testified and admitted to having had heard from the business community that jobs would be lost.  Hopefully this convinces lawmakers to think twice before passing an increase.  One thing is for sure; increasing the minimum wage is an economically risky move, with little payout at the end of the day.

Shayne Spence is the Outreach and Development Coordinator for the Ethan Allen Institute.

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The Ethan Allen Institute is Vermont’s free-market public policy research and education organization. Founded in 1993, we are one of fifty-plus similar but independent state-level, public policy organizations around the country which exchange ideas and information through the State Policy Network.

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