Economics 101: The CBO estimates that raising the minimum wage will cost jobs

Our now-banned commenter was always trumpeting, “CBO! CBO! CBO!” telling us that the Congressional Budget Office had estimated that the Patient Protection and Affordable Care Act would save us money in the long run . . . right up until they revised their estimates, and have now said that the PP&ACA will cost the economy “job equivalents” in fewer hours worked.

And now, the CBO is puncturing another liberal goal. From The Wall Street Journal:

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

By Eric Morath | Updated Feb. 18, 2014 3:06 p.m. ET

Raising the federal minimum wage to $10.10 per hour would cost the U.S. economy about 500,000 jobs by late 2016, but the increase would lift 900,000 Americans out of poverty, the Congressional Budget Office said Tuesday.

The nonpartisan CBO studied a gradual increase to $10.10 per hour by July 2016 from the current $7.25 rate, mirroring a proposal several Democrats put forth in Congress and President Barack Obama endorsed.

The most likely outcome of such an increase would be the loss of a half-million mostly low-wage jobs, the CBO said. The increased cost of labor would encourage employers to upgrade technology or hire fewer, higher-skilled workers, the report said.

That effect would be partially offset by higher earnings among low-wage workers who retained their jobs. The report estimated 16.5 million workers would see their average weekly pay increase if the minimum wage was increased to $10.10 per hour by July 2016.

Overall, low-wage workers’ incomes would increase by $31 billion, but not all earners would be are members of low-income households. Just 19% of the income increase would flow to households living below the poverty line.

More at the link.

Now, if we take the CBO study at face value, an increase in the minimum wage would be a trade-off: fewer people would have jobs, but more people who did have jobs would have family incomes which put them above the poverty line.

Of course, the White House disputed the CBO findings:

White House Disputes CBO, Says Minimum Wage Hike Won’t Cost Any Jobs
By Sahil Kapur – February 18, 2014, 4:53 PM EST4644

The White House’s top economist moved to dispute a Congressional Budget Office finding on Tuesday that raising the federal minimum wage to $10.10 per hour could cost up to 500,000 jobs once implemented in the second half of 2016.

“[The CBO finding] does not reflect the consensus view of economists who have said the minimum wage would have little to no impact on employment,” Jason Furman, the chairman of the White House Council of Economic Advisers (CEA), told reporters on a conference call. “It goes outside the consensus view of economists when it comes to the impact of the minimum wage on employment.”

Furman voiced “respectful disagreement” with CBO, pointing to other studies, which he listed in a blog post on the White House’s web site, that say a minimum wage increase wouldn’t cost jobs. They include a poll of economists conducted by the University of Chicago Booth School of Business and a study by economists at the Federal Reserve Bank of Chicago.

“Our view is that ‘zero’ is a perfectly reasonable estimate of the impact of the minimum wage on employment, based on research that began with David Card and Alan Krueger comparing minimum wage effects on employment,” he said, calling that a “completely reasonable” estimate based on the “highest-quality studies” on the issue.

More at the link. It’s hardly a surprise that the White House would disagree, but your Editor simply looks back on previous economic projections by this Administration, and fails to see where anyone but the most sycophantic supporter of President Obama could take White House estimates seriously.

Doug Elmendorf, the CBO Director, defended his groups analysis against the White House attacks. What’s interesting about that story is the final paragraph:

While taking issue with the jobs statistic, the White House touted other findings in the CBO report which said raising the wage would give 16.5 million low-wage workers a pay raise and lift about 900,000 out of poverty.

In other words, only the part of the CBO study the Administration didn’t like was junk; the part they did like, why they were gold, gold!

If we had listened to every economic prognostication and policy coming out of this Administration, why we should have full employment and not a single soul in poverty. And, very unfortunately, we did listen to them, passing the 2009 stimulus plan — remember, the one which was supposed to hold unemployment to a maximum of 8% — and the 2010 health care reform act, which was supposed to bend the cost curve down and save us money:

Health Law’s Impact Has Only Begun
Insurers Seek Healthy Enrollees, Doctors Educate New Patients, Employers Wrestle With Added Costs
By Anna Wilde Mathews | Updated Feb. 18, 2014 9:49 p.m. ET

On Jan. 1, the key provisions of the Affordable Care Act took effect. Americans gained access to new health plans subsidized by federal dollars. Insurers no longer can turn away people with existing conditions. Millions are now eligible for new Medicaid benefits.

But the federal law also upended existing health-insurance arrangements for millions of people. Companies worry about the expense of providing new policies, some hospitals aren’t seeing the influx of new patients they expected to balance new costs and entrepreneurs say they may hire more part-time workers to avoid offering more coverage.

The law’s true impact will play out over years. It will depend in part on whether backers overcome serious early setbacks, including crippling glitches in the new online insurance marketplaces and many states’ rejection of the Medicaid expansion. But another obstacle the law faces is pushback from some consumers and industry over the higher costs, complex rules and mandatory requirements it imposes.

More at the link.

They say that even a stopped clock is right twice a day. If so, a stopped clock is right a lot more often than the Obama White House!

Well, the voters had their say in 2012, and we’re stuck with the poltroon in the White House for the next two years, eleven months and one day. The only hope that we have is to elect more Republicans to Congress to try to limit the damage that our 44th President can cause over that time.

11 Comments

  1. but more people who did have jobs would have family incomes which put them above the poverty line.

    I would wager that most people with families are not working minimum wage jobs. It’s mostly teenagers/people in entry level positions, etc. By the time you are married and have kids you are probably well above “Entry level”.

  2. Remember the CBO report on BO Care and it wouldn’t cost much. Dems Cheered. Now the CBO has said BO Care will cost a bundle. Dems silent. Now the CBO says raising the miminum wage will cause the loss of of hundreds of thousands of Jobs, and the Dems scream how Partisan the CBO is. Nothing to see, just move along folks.

  3. but more people who did have jobs would have family incomes which put them above the poverty line.

    Good. Then they should be denied all public assistance since that is for those in poverty. At least that’s what the leftists tell us. But I suspect it’s more of a vote buying mechanism.

    It amuses me that people like our comrade constantly look to and believe in the prognostications of the CBO. They’re never right and frequently so far off it’s silly. The CBO, quite like the comrade, is composed of academics, theorists, lawyers and the like none of whom have run a business. Yet they continually feel worthy to dictate to and make predictions about a subject, economics/business, in which they have little or no knowledge, education or experience. Only a real fool or a blind radical ideologue would believe what they prognosticate. A reasonable person could use what they say as an opinion, prediction or educated guess but any more weight given to the CBO than that is pure fantasy.

  4. Good. Then they should be denied all public assistance since that is for those in poverty. At least that’s what the leftists tell us. But I suspect it’s more of a vote buying mechanism.

    All BO will do is have the GOAL POSTS moved.

  5. BTW, the CBO is anything but non-partisan. Every person at the CBO has a political opinion, view and/or agenda so to put forth some dream world fallacy that somehow they suddenly become non-partisan because they’re CBO is poppycock. (There’s a word you don’t hear much any more ). The only thing which could be considered non-partisan is if the numbers were fed into a computer programmed by some a-political nerd in his mom’s basement. Other than that people’s thoughts, beliefs and feelings bleed through.

    And when someone (usually of the comrade Perry variety ) claim a group, whether in government or private, is non-partisan what he’s really saying is : Don’t look too deep cause they’re really liberal. One must remember how leftists think. If you’re a conservative then you’re a radical, dangerous, racist, homophobe full of greed and hate. But if you’re a leftist from a Humphrey style liberal to Karl Marx you’re just a moderate progressive full of compassion and unicorn farts.

  6. Just as one small example of the left’s version of non-partisan:

    A purportedly “objective” think tank and taxpayer-funded federal contractor – described by the IRS as its “trusted partner” – is acting as the Obama administration’s propaganda tool for Obamacare and infiltrating the mainstream media, which eagerly cite the leftist group’s studies.

    The Urban Institute advocates for public health insurance, wealth distribution and tax hikes for higher income-earners. The supposedly “nonpartisan” organization’s employees have a record of donating nearly 100 percent of their political contributions to Democrats.

    Read more at http://www.wnd.com/2014/02/irs-trusted-partner-is-obamacare-propaganda-tool/#jzMRlxWvsdIeueKk.99

    I guess if you give 100% to Democrats you’re non-partisan but any support of Republicans would brand one a right-wing, hate mongering, homophobic, racist, engaged in a war on women, minorities, gays and Sandra Fluke.

  7. Non-partisan CBO, non-partisan IRS, non-partisan Department of Justice, non-partisan Environmental Protection Agency, non-partisan No Agency of Government Obama can use as a weapon against the interests of honest taxpaying loyal American citizens.

  8. And that’s the crux of the situation, ropelight. If any governmental agencies or departments should under any and all circumstances be undeniably non-partisan it should be the IRS, the DOJ, the EPA and any department or agency that could jackboot any citizen if corrupted by politics. Unfortunately for the Republic it may be too late. The corruptocrats like our own comrade are more interested in advancing their communist ideology then applying the law or the very concept of justice evenly.

  9. Eric wrote:

    I would wager that most people with families are not working minimum wage jobs. It’s mostly teenagers/people in entry level positions, etc. By the time you are married and have kids you are probably well above “Entry level”.

    There are a fair number of families in which one adult has a minimum or near-minimum wage job, while the other does a lot better.

    But there’s a real information-skewing problem: since so many “families” consist of men and women who are not married to each other, you have a poor, single mother, trying to rear her three kids on a minimum wage income, and food stamps and WIC and welfare, while her live-in but not officially so boyfriend is making $32 an hour as a carpenter.

  10. But there’s a real information-skewing problem: since so many “families” consist of men and women who are not married to each other, you have a poor, single mother, trying to rear her three kids on a minimum wage income, and food stamps and WIC and welfare, while her live-in but not officially so boyfriend is making $32 an hour as a carpenter.

    Or, more likely, $500/night as a drug dealer.

  11. I think what the Editor is trying to say Eric, is that the left has so skewed (screwed?) up the “family unit” over the past 4 decades that it has made it impossible to determine the actual impact of economics on households since any conglomeration of kids and adults “can” constitute a household. I put “can” in parentheses because if the left desires another outcome for their pseudo statistics then that “can” becomes “didn’t qualify” for consideration as a family unit. See, it’s win-win for the fraudulent liars no matter what we say. Hell, the whole object of raising the minimum wage during bad economic times is to force people to loose jobs. They then turn to the government for support. First for unemployment compensation and when that runs out some go on welfare and some on disability. The Democrats would love it if 10 million lost their jobs. They get to blame the job loss on evil, greedy Republicans then hand out free-bees and voila! 10 million new Democrat voters sucking the life out of us and America. We all need to remember, Democrats never propose anything to create new wealth, only redistribute existing wealth to their chosen targets. I defy any leftist here to identify ONE single progom program proposed by the left that actually is designed to create new wealth for individuals or America.

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