CBO estimates 500,000 jobs lost due to minimum wage hike
A couple of days ago the Congressional Budge Office (CBO) released a report on the proposal to raise the federal minimum wage from $7.25/hour to $10.10/hour. The good news is that
most [low-wage workers] would receive higher pay that would increase their family’s income, and some of those families would see their income rise above the federal poverty threshold.
Of course, no one was really disputing that — it is, after all, the entire purpose of the proposal. But there’s a catch. As economist Thomas Sowell likes to say (and any engineer would agree with him): “there are no solutions, only trade-offs”. In this case the trade-off is that jobs would be lost:
some jobs for low-wage workers would probably be eliminated, the income of most workers who became jobless would fall substantially, and the share of low-wage workers who were employed would probably fall slightly.
Specifically, CBO estimates that the minimum wage hike would
reduce total employment by about 500,000 workers, or 0.3 percent.
This may come as a surprise to you if you only listen to leftist politicians and/or MSNBC, who would have you believe that increasing the minimum wage would also reduce unemployment and actually create jobs. Apparently, you can have your cake and eat it, too! But the CBO report is not surprising in the least to economists and those of us who have studied some economics — the vast majority of economists agree (H/T Wintery Knight) that a minimum wage increases unemployment (emphasis added):
I include a table of propositions to which most economists subscribe, based on various polls of the profession. Here is the list, together with the percentage of economists who agree:
- A ceiling on rents reduces the quantity and quality of housing available. (93%)
- Tariffs and import quotas usually reduce general economic welfare. (93%)
- Flexible and floating exchange rates offer an effective international monetary arrangement. (90%)
- Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%)
- The United States should not restrict employers from outsourcing work to foreign countries. (90%)
- The United States should eliminate agricultural subsidies. (85%)
- Local and state governments should eliminate subsidies to professional sports franchises. (85%)
- If the federal budget is to be balanced, it should be done over the business cycle rather than yearly. (85%)
- The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged. (85%)
- Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. (84%)
- A large federal budget deficit has an adverse effect on the economy. (83%)
- A minimum wage increases unemployment among young and unskilled workers. (79%)
- The government should restructure the welfare system along the lines of a “negative income tax.” (79%)
- Effluent taxes and marketable pollution permits represent a better approach to pollution control than imposition of pollution ceilings. (78%)