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GOP’s Minimum Wage Hysteria Is Overblown (Again)

Economy Memo Pad Politics

GOP’s Minimum Wage Hysteria Is Overblown (Again)


Since the Congressional Budget Office projected on Tuesday that raising the minimum wage to $10.10 per hour would “reduce total employment by about 500,000 workers,” Republicans across the country have gleefully cited the CBO’s report as evidence that the policy would be a job killer.

“This report confirms what we’ve long known: While helping some, mandating higher wages has real costs, including fewer people working,” a spokesman for House Speaker John Boehner said.

“Today the non-partisan CBO spelled out some of the dire consequences of Alison Lundergan Grimes’ blind allegiance to Barack Obama’s agenda,” Mitch McConnell’s campaign said in a statement. “Just like with Obamacare, Alison Lundergan Grimes and the Obama-liberals promise a world full of prosperity, but the reality of their policies is fewer jobs and less opportunity for our most vulnerable.”

So would the Harkin-Miller bill currently being mulled by Congress — which would raise the minimum wage to $10.10 per hour by 2016, then tie it to the Consumer Price Index thereafter — be a job-killing disaster? Not exactly. Once again, Republicans are grabbing on to a favorable headline in a CBO report, while deliberately failing to see the forest for the trees.

First, the CBO does not flatly claim that raising the minimum wage will kill 500,000 jobs. Rather, it projects that a $10.10 minimum wage would contract employment by somewhere between a “very slight decrease” and 1 million workers — 500,000 is the CBO’s best guess on where the total number of job losses will fall, but many economists disagree. For example, over 600 economists — including seven Nobel laureates and eight former presidents of the American Economic Association — have signed an open letter urging Congress to raise the minimum wage, and noting that “the weight of evidence now [shows] that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market.”

Even if raising the minimum wage did cost the economy 500,000 jobs, however, the benefits would still outweigh the costs. For example, according to the CBO, raising the minimum wage would directly lift 900,000 people out of poverty.

Additionally, 16.5 million workers would see their hourly wages increased as a result of a $10.10 per hour minimum wage. Another 8 million workers who currently earn just above $10.10 per hour could also see their wages rise as a result of a hike.

CBO Chart

So while Republicans will focus on the roughly 0.3 percent of the workforce that could lose their minimum-wage jobs as a result of a raise, expect Democrats and other living-wage advocates to point out that roughly 98 percent of workers who will be affected by an increase will benefit.

Even with their negative interpretation of the CBO report, Republicans are fighting an uphill battle against a minimum-wage increase. Polls have repeatedly found that voters reject the GOP’s position on the issue.

Chart: CBO via The Washington Post

Photo: Olivier Douliery/Abaca Press/MCT

Henry Decker

Henry Decker was formerly the Managing Editor of The National Memo. He is currently an Online Associate at MRCampaigns.

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  1. daniel bostdorf February 19, 2014

    The basic….fundemental reality is that we need to lift people up and out of poverty where the big tax dollars are spent of social welfare programs. Raising minimum wage does this.

    Economists agree: Raising the minimum wage reduces poverty
    Quoting artice:
    the CBO does not flatly claim that raising the minimum wage will kill 500,000 jobs. Rather, it projects that a $10.10 minimum wage would contract employment by somewhere between a “very slight decrease” and 1 million workers — 500,000 is the CBO’s best guess on where the total number of job losses will fall, but many economists disagree. For example, over 600 economists — including seven Nobel laureates and eight former presidents of the American Economic Association — have signed an open letter urging Congress to raise the minimum wage, and noting that “the weight of evidence now [shows] that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers, even during times of weakness in the labor market.”

    A higher minimum wage will lead to a significant boost in incomes for the worst off in the bottom 30th percent of income, while having no impact on the median household.

    As many economists have argued, the minimum wage ”substantially ‘held up’ the lower tail of the U.S. earnings distribution” through the late 1970s, but this effect stopped as the real value of the minimum wage fell in subsequent decades. This gives us an empirical handle on how the minimum wage would help deal with both insufficient low-end wages and inequality, and the results are striking.

    Charles Darwin once wrote, “If the misery of the poor be caused not by the laws of nature, but by our institutions, great is our sin.” One of the key institutions of the modern economy, the minimum wage, could dramatically reduce the misery of the poor.

    Read facts here…not fiction or theories…



    From Wall Street Journal–This is up to date analysis by the foremost authority this matter:

    Raising Minimum Wage Reduces Jobs, Poverty, Study Says Losses in Employment Partly Offset by Increased Purchasing Power

    quote from article:

    “Richard Trumka, president of union federation AFL-CIO, which is holding its winter meeting of labor leaders in Houston this week to strategize for the year, immediately challenged the study’s findings and said it echoed false claims by conservatives. “Every time momentum builds for lifting wages, conservative ideologues say it will cost jobs. Every time, they’ve been dead wrong,” Mr. Trumka said in an emailed statement issued during his closed-door meeting with labor leaders.”

    NOTE from me: and the key is lifting Americans out of poverty–not job losses. Getting out of poverty cuts government social welfare assistance(your tax dollars) to those with increased $$ in pocket—-it stmulates the economy:

    “The CBO said that a gradual increase to $10.10 an hour by July 2016
    would eliminate 500,000 jobs, but lift 900,000 Americans out of poverty
    from the total of 45 million projected to be living in poverty in 2016.

    “The report predicted other positive effects for the economy. Low-wage
    workers tend to spend a larger fraction of their earnings, so some firms
    would see increased demand for their goods and services as a result.”

    Ok—with all this stated….I do not believe in a “minimum wage.”

    I believe in a guranteed income…..but that is a subject for later…

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  2. dtgraham February 19, 2014

    I wouldn’t make a strong argument against 0.3% of the workforce experiencing negative employment due to this. I suppose it’s possible, but I would simply say that projections on wage hike/job loss analysis are very difficult to make due to the lack of any consistency of correlation between the two; when looking at past minimum hikes and present real world examples. There are too many variables.

    Economics is an art and not a science. Researchers with a bias can get creative with their own complex predictive formulas involving logarithms, and computations of elasticity and deviations. Skewed results are easy when predicting; especially when you have subconscious, pre-determined conclusions in the back of your mind. I don’t doubt the integrity or professionalism of the CBO though. Just saying.

    Labour researchers David Madland and Keith Miller analyzed 25 years of minimum wage increases in U.S. States. No clear evidence was found that minimum wage increases affect aggregate job creation when unemployment rates are >= 7.0%. In fact, unemployment rates actually declined 52% of the time after a minimum wage increase. An even lesser relationship existed at < 7.0%.

    In the classic era of Keynesianism (1946-1970's) when minimum wages were generous [often above the poverty line in most countries] we had very high employment numbers—historically unprecedented high employment. American unemployment in the late 60's/early seventies was around 3.5% and the purchasing power of the minimum wage was far higher. Now mind you, I realize that globalization and outsourcing weren't such factors then, but nevertheless. Where I live, the minimum wage is $10.45 per hour and the unemployment rate is 5.5%.

    The most recent wave of minimum wage/job loss research—roughly since 2000—shows that the weight of the evidence points to little or no employment response to modest increases in the minimum wage. I wonder if certain economists' predictive formulas are reflective of the newer data.

    If not now…when? To listen to Republicans, it should never be raised. Look at minimums around the world. The U.S. federal minimum has gotten so low that soon there may not be a point to having a job. You may as well just plop your hat down on the street corner and panhandle. At least you'd be self employed and a free agent. A lot of societal problems are created when work is not valued and rewarded.

  3. Daniel Jones February 19, 2014

    How do you know when the GOP lies about economic matters?

    They say something..

    1. daniel bostdorf February 20, 2014


    2. CPAinNewYork February 21, 2014

      Their lips are moving.

  4. BPI Squirrel February 20, 2014

    We agree:

    Ultimately the job loss debate is arguing about how many angels can dance on the head of a pin. If the minimum wage is increased to $10.10 and the economy grows 3.1 million low-wage jobs by 2016 – on pace with projections by the Bureau of Labor Statistics in December – conservatives will argue there would have been 3.6 million new jobs without the minimum wage hike. They won’t be able to prove that, but neither will progressives be able to prove them wrong.

    But the benefits for low-wage workers would be immediate and measurable, with millions of hardworking Americans lifted out of poverty … and able to afford a few more groceries, clothes, school supplies, and other items on the shelves at Walmart and other retailers.

    It seems absurd to refuse those immediate, measurable benefits for 97% of low-wage workers affected – according to the CBO’s estimate – based on speculative and untestable costs to the other 3% of low-wage workers. But that’s precisely the kind of absurdity that dominates our political dialogue.

  5. disqus_ivSI3ByGmh February 20, 2014

    To put real numbers to this, a $10.10/hour minimum wage results in a weekly pay of $404 before taxes, and an annual pay of $21,008. Once you take taxes, social security, FICA, etc. out, you have less than the federal poverty guidelines for a family of three. Oh, yeah. This will let them live the good life!

    1. Bill February 20, 2014

      For people at the bottom any increase will help them a lot.

  6. charles king February 20, 2014

    I just want the American people to do some (CRITICAL THINKING) about What? is going on with our government, is it working properly, if Not, Who? the hell is at fault, if its your Congressman or Congresswoman VOTE their ass OUT. The same goes for your Governers, your Senators, your Commissioners and any other policitions Who? try to rule the People with MONIES. The Minimum wages have not been looked at in over fifteen years so Why? not raise it , but some owners would lose some of their profits. What? kind of thinbking is that in a capitalistic country, moving forward is the MOTTO for Profits Not doing Nothing. You Do Not Do Nothing in Any situation and this I find The GOP at fault. Both parties has faults but to not do nothing is very dangerous for the country. WhoEVER? is at fault VOTE their Ass out, no if , and or buts. Thank You are the magic words in my book. I Love Ya All. Check-out Webster’s Dict. Plutocracy . Mr. C. E. KING

    1. CPAinNewYork February 21, 2014

      Where did your education stop, in the third grade?

  7. Jambi February 20, 2014

    Have “a litttle extra money to spend”…..
    Will “spend”…generating a boost for the economy…

  8. dpaano February 20, 2014

    Didn’t someone figure that if McDonald’s raised their pay for their workers, it would only cost 3 cents more for a hamburger? I’m perfectly willing to pay 3 cents more to get someone off welfare or food stamps. After all, it’s the taxpayers that already pay more for welfare and food stamps…..what’s 3 cents?

    1. dtgraham February 20, 2014

      That was Elizabeth Warren. Love that woman.

    2. Independent1 February 20, 2014

      Actually it was 4 more cents on a $7.15 combo meal that Elizabeth used as an example. What Elizabeth didn’t point out is that McDonald’s stores in Europe where the min wage is $12/hour are more profitable than the McDonald’s in America – one possible reason being, that with everyone in Europe making at least $12/hour, even McDonald’s own workers can afford to order the more profitable items in McDonald’s menu list than the items many of America’s min wage workers currently have to resort to ordering (including McDonald’s own workers) which is usually something from what used to be McDonald’s dollar menu.

  9. Bill February 20, 2014

    The GOP cares about minorities as proved again with this article, the only thing more important than the 3% who might loose work is the 1% who they will protect at any cost, what a bunch of phony assholes.

  10. howa4x February 20, 2014

    Will the Walton’s a family with 115 billion in collective wealth really be hurt by a $3.00 raise in the minimum wage?? Really!!!!

  11. ThomasBonsell February 20, 2014

    The first minimum wage was imposed in 1938 when the unemployment rate was 19 percent because of the GOP-created Great Depression. By the end of fiscal year 1941 (June 30, 1941) before involvement in World War II distorted economics everywhere, the unemployment rate was 9.9 percent.

    I don’t see much job killing there.

    Unsaid in the article is that the additional disposal income for millions of people will be spent in the economy creating hundreds of thousands of new jobs, probably many times more than the GOP claims will be lost.

  12. Pamby50 February 20, 2014

    I was reading through the posts and one was arguing that it wouldn’t be worth it after taxes. The federal poverty level for a family of 4 is $23,850. By raising the minimum wage to 10.10 an hour, a family of 4 would take home $19,400. Still not out of poverty but if the 7.25 were to remain, the take home would remain at $15,050. It would give a person a sense of pride that they are paying their way as opposed to waiting for a hand out. You would think the republican party could think this is a good idea, but no. They want to cut food stamps and any other government services and also keep your wages low.

    1. CPAinNewYork February 24, 2014

      You’re forgetting that the Republican Party and the conservative rich want to take over America.

  13. plc97477 February 20, 2014

    With more disposable income people will need to hire more workers to keep up with the business. There might be a drop off just at first but I don’t expect it to last long.

    1. 4sanity4all February 23, 2014

      And since so many businesses are now running with the fewest employees possible, I don’t see how they would be letting anyone go, especially if sales rise due to consumers having a little more in their pocket.

  14. neeceoooo February 20, 2014

    As I commented before, increasing the minimum wage is a win, win solution. Putting more money into the pockets of the American people and they will spend more money which will help the economy. Putting more money into the pockets of the American people will increase the tax rate because they now pay more taxes. Putting more money into the pockets of the American people will decrease the subsidies from the government of the poorest families such as food stamps and welfare.

  15. CPAinNewYork February 21, 2014

    We should all be aware by now that one cannot place any reliance on a business person’s reaction to anything that doesn’t immediately benefit the rich.

    Of course the Republicans are opposed to raising the minimum wage. It’s their usual knee jerk reaction.

    1. 4sanity4all February 23, 2014

      But what really irritates me is when Fox news gives people at the bottom the talking points they need to be against their own self interests. I am agog when I hear people refer to minimum wage earners as takers. If they are earning minimum wage, they are doing the smelly, dangerous, dirty jobs that difficult and repetitive. In my opinion, that makes them givers of the highest order.

      1. CPAinNewYork February 24, 2014

        I understand your frustration, but keep in mind the principle that sometimes it’s impossible to prevent ignorant people from acting against their self interest.

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