Congressional Budget Office Report Finds Minimum Wage Lifts Wages for 16.5 Million Workers
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, CBO’s 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 today’s 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 CBO’s 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 CBO’s 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 nation’s output and income slightly.”
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