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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsWH: Congressional Budget Office Report Finds Minimum Wage Lifts Wages for 16.5 Million Workers
Posted by Jason Furman and Betsey Stevenson
The new Congressional Budget Office (CBO) report finds that 16.5 million workers would get a raise from increasing the minimum wage to $10.10 per hour and this would help millions of hard-working families, reduce poverty, and increase the overall wages going to lower-income households.
On employment, CBOs central estimate is that raising the minimum wage to $10.10 per hour would lead to a 0.3 percent decrease in employment and CBO acknowledges that the employment impact could be essentially zero. But even these estimates do not reflect the overall consensus view of economists which is that raising the minimum wage has little or no negative effect on employment. For example, seven Nobel Prize winners and more than 600 other economists recently stated that: In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing 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.
The following are six key points from the latest CBO report. For more information, last week the Council of Economic Advisers (CEA) released a summary of the economic case for raising the minimum wage.
1. CBO finds that raising the minimum wage to $10.10 per hour would directly benefit 16.5 million workers. According to todays CBO report, 16.5 million people making less than $10.10 per hour would get a raise if the minimum wage is increased. This figure does not include CBOs estimate of as many as 8.0 million workers who currently earn just above $10.10 an hour but could also potentially see a raise due to the ripple effect of a shifting wage structure.
2. CBO finds that raising the minimum wage would increase income for millions of middle-class families, on net, even after accounting for its estimates of job losses. Middle class families earning less than six times the poverty line (i.e., $150,000 for a family of four in 2016) would see an aggregate increase of $19 billion in additional wages, with more than 90 percent of that increase going to families earning less than three times the Federal poverty line (i.e., $75,000 for a family of four in 2016). On net CBO estimates that national income would rise.
This finding is consistent with the fact that 62 percent of expert economists polled by the University of Chicago Booth School of Business agreed that the benefits of raising the minimum wage outweigh any potential costs, as compared to only 16 percent who disagreed.
3. CBO finds that this wage increase would help the economy today. Specifically CBO finds that the extra purchasing power for workers will expand aggregate demand and strengthen the economy today. As CBO wrote, Raising the minimum wage increases that demand, in CBOs assessment, because the families that experience increases in income tend to raise their consumption more than the families that experience decreases in income tend to reduce their consumption. In the short term, that increase in demand raises the nations output and income slightly.
This finding is consistent with other research. For example, a study released by economists at the Federal Reserve Bank of Chicago found that raising the minimum wage to $9 per hour would raise growth by 0.3 percentage point in the short run.
4. CBO found that only 12 percent of low-wage workers will be teenagers. Contrary to critics claims that teens are the primary beneficiaries of increases in the minimum wage, CBO, found only 12 percent of the workers likely to benefit from a minimum wage increase are teenagers.
5. CBO also found that raising the minimum wage would lift 900,000 people out of poverty. Opponents claim raising the minimum wage wont reduce poverty, but that is not the case, as many American who work full time are unable to make ends meet. This finding echoes the broad consensus of academic studies on the topic, which is nearly unanimous in finding that increases in the minimum wage reduce poverty.
6. CBOs estimates of the impact of raising the minimum wage on employment does not reflect the current consensus view of economists. The bulk of academic studies, have concluded that the effects on employment of minimum wage increases in the range now under consideration are likely to be small to nonexistent. CBO also agrees that the employment effect could be essentially zero, but their central estimates are not reflective of a consensus of the economics profession. Specifically:
- Seven Nobel Prize Winners, eight former Presidents of the American Economic Association and over 600 other economists recently summarized the literature on the employment effects of the minimum wage in this way: In recent years there have been important developments in the academic literature on the effect of increases in the minimum wage on employment, with the weight of evidence now showing 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.
- The pioneering research in this area was conducted by John Bates Clark Medal winner David Card and Alan Krueger, who published a study in the American Economic Review in 1994 finding that fast food restaurants in New Jersey did not cut back employment relative to Pennsylvania after the former State raised its minimum wage. They concluded, We find no indication that the rise in the minimum wage reduced employment.
- The Card-Krueger research was generalized by Arindrajit Dube, T. William Lester, and Michael Reich who compared 288 pairs of contiguous U.S. counties with minimum wage differentials from 1990 to 2006. Based on this, researchers found no adverse employment effects from a minimum wage increase.
- A recent literature review of the extensive published work on the minimum wage concluded: [W]ith 64 studies containing approximately 1,500 estimates, we have reason to believe that if there is some adverse employment effect from minimum-wage raises, it must be of a small and policy-irrelevant magnitude.
- Another recent review of the theory and evidence on the minimum wage by John Schmitt at the Center for Economic Policy Research concluded that The employment effects of the minimum wage are one of the most studied topics in all of economics. This report examines the most recent wave of this research roughly since 2000 to determine the best estimates of the impact of increases in the minimum wage on the employment prospects of low-wage workers. The weight of that evidence points to little or no employment response to modest increases in the minimum wage.
Jason Furman is the Chairman of the Council of Economic Advisers. Betsey Stevenson is a member of the Council of Economic Advisers.
http://www.whitehouse.gov/blog/2014/02/18/congressional-budget-office-report-minimum-wage-confirms-consensus-views-beneficiari
Kingofalldems
(38,425 posts)woo me with science
(32,139 posts)Raising the minimum wage by a few bucks while simultaneously pushing the TPP is like handing a man a quarter but then emptying the bank accounts of everyone in town and breaking their legs so they can't work anymore.
Study: Obama's "Trade" Deal Would Mean a Pay Cut for 90% of U.S. Workers
http://www.democraticunderground.com/10023661805
Obama cannot push the TPP and simultaneously claim to give a damn about income inequality. They are, as Manny put it so well, VIOLENTLY MUTUALLY EXCLUSIVE.
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ProSense
(116,464 posts)stand with the corporate shills who oppose it?
Corporate shills take aim at workers fighting for a living wage
http://www.democraticunderground.com/10024357604
"Obama cannot push the TPP and simultaneously claim to give a damn about income inequality. They are, as Manny put it so well, VIOLENTLY MUTUALLY EXCLUSIVE. "
He damn sure can. In fact, he just made history using an executive order to raise the minimum wage for federal contract workers, including those with disabilities.
http://www.democraticunderground.com/10024489919
Wait, this "Manny": http://www.democraticunderground.com/10024497604
ProSense
(116,464 posts)ProSense
(116,464 posts)http://www.timeforaraise.org/2013/06/27/ralph-nader-to-president-obama-its-your-sole-decision/
June 25th marked the 75th anniversary of the federal minimum wage law in the United States, known as the Fair Labor Standards Act. When President Franklin Delano Roosevelt signed this legislation, his vision was to ensure a fair days pay for a fair days work and to end starvation wages.
Seventy five years later, there are 3.6 million Americans working for pay at or below the federal minimum wage. More extensively, thirty million low wage workers are making less today, adjusted for inflation, than they did 45 years ago in 1968. They are working for a minimum wage that does not even reach the federal poverty line for a family of three and they cannot afford basic necessities like food, housing, transportation, and health care.
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Not to mention that increasing wages could help spur on a lagging economic recovery. The Wall Street Journals story on June 24, Slow-Motion U.S. Recovery Searches for Second Gear, discussed how the slow pace of recovery has left businesses and consumers wary. The Economic Policy Institute, in examining Senator Tom Harkin (D-Iowa) and Congressman George Millers (D-Calif.) legislation to increase the minimum wage to $10.10 by 2016, estimated that increasing the minimum wage above $10 per hour would provide $51 billion in additional wages during the phase in period for consumers to increase their spending for their livelihoods.
When Franklin Delano Roosevelt signed the Fair Labor Standards Act into law, he showed courage in the face of the Great Depression as well as considerable opposition and criticism from businesses. Is it not time, after four and a half years, for you to leave your mark, to show Americans what type of President you want to be remembered as, and to be a leader on this issue? Millions of workers throughout the country deserve a minimum wage that, at least, catches up with 1968.
okaawhatever
(9,457 posts)It's a joke of a paper meant for someone to quote or republish. It's certainly not for an academic.
It states: Most workers are likely to lose, then in the very next sentence says except lower income workers and the higher income workers who are less susceptible to international competition. Then he mentions that their income will also increase due to enforcement of patents and copyrights.
It's word salad from there. He uses another study, that hasn't been peer reviewed to come up with his numbers for GDP growth. Then when referring to wage deflation, he uses 1997 and 2007 data. In a footnote he mentions that those were both recession years and highly unusual.
I wouldn't quote that if I were you. I think the report is an example of scholar work for profit.
I don't know what the TPP will do to wages. I don't know what the TPP will do to GDP. The deal is falling apart anyway, China is clearly getting to someone in the negotiations. I think it's Indonesia or Malaysia. The other thing you have to consider is that the design of this trade agreement is to enforce patents and intellectual property. It's to make China play by the same rules as everyone else, so they don't have an unnatural trade advantage.
http://www.cepr.net/documents/publications/TPP-2013-09.pdf