CBO: Raise minimum wage, raise incomes, lower poverty

Looks like we got Republicans trying to deceive about another CBO report, so looks like I have more debunking to do. This time it's about a proposed increase in the minimum wage.

In the CBO report (which you can read in full by clicking here), they go through a scenario where the federal minimum wage is raised to $9 by 2016, and a second scenario where it goes to $10.10 in the next 3 years. What I imagine righties might try to harp on is this passage.

Once fully implemented in the second half of 2016, the $10.10 option would reduce total employment by about 500,000 workers, or 0.3 percent, CBO projects. As with any such estimates, however, the actual losses could be smaller or larger; in CBO’s assessment, there is about a two-thirds chance that the effect would be in the range between a very slight reduction in employment and a reduction in employment of 1.0 million workers....

The $9.00 option would reduce employment by about 100,000 workers, or by less than 0.1 percent, CBO projects. There is about a two-thirds chance that the effect would be in the range between a very slight increase in employment and a reduction in employment of 200,000 workers, in CBO’s assessment.

"JOB KILLER!" Well, we can't have that, now can we? Actually, we can, and should. Because look at how many more others end up better off under the CBO's analysis.

Many more low-wage workers would see an increase in their earnings. Of those workers who will earn up to $10.10 under current law, most—about 16.5 million, according to CBO’s estimates—would have higher earnings during an average week in the second half of 2016 if the $10.10 option was implemented. Some of the people earning slightly more than $10.10 would also have higher earnings under that option, for reasons discussed below. Further, a few higher-wage workers would owe their jobs and increased earnings to the heightened demand for goods and services that would result from the minimum wage increase.

The increased earnings for low-wage workers resulting from the higher minimum wage would total $31 billion, by CBO’s estimate. However, those earnings would not go only to low-income families, because many low-wage workers are not members of low-income families. Just 19 percent of the $31 billion would accrue to families with earnings below the poverty threshold, whereas 29 percent would accrue to families earning more than three times the poverty threshold, CBO estimates.

That's all interesting, as it's not just the poverty-stricken and working poor that would benefit from a minimum-wage increase, but also many people who would identify as middle and even upper-middle class. The CBO explains in more detail later how the minimum wage increase could ripple through other parts of the economy.

After a minimum-wage increase, some employers try to preserve differentials in pay that existed before—for example, so that supervisors continue to be paid more than the people they supervise—by raising the wages of people who previously earned a little more than the new minimum. Also, some wages determined by collective bargaining agreements are tied to the federal minimum wage and could therefore increase. As a result, an increase in the minimum wage causes some workers who would otherwise have earned slightly more than the new minimum wage to become jobless, for the same reasons that lower-wage workers do; at the same time, some firms hire more of those workers as substitutes for the workers whose wages were required to be increased.

The change in employment of low-wage workers caused by a minimum-wage increase differs substantially from firm to firm. Employment falls more at firms whose customers are very sensitive to price increases, because demand for their products or services declines more as prices rise, so those firms cut production more than other firms do. Employment also falls more at firms that can readily substitute other inputs for low-wage workers and at firms where low-wage workers constitute a large fraction of input costs. However, when low-wage workers have fewer employment alternatives overall, employment can fall less at firms that offset some of the increased costs with higher productivity from employees’ working harder to keep their better-paying jobs and with the lower cost of filling vacant positions that results from higher wages’ attracting more applicants and reducing turnover. Some firms, particularly those that do not employ many low-wage workers but that compete with firms that do, might see demand rise for their goods and services as their competitors’ costs rise; such firms would tend to hire more low-wage workers as a result.

The CBO also indicates that lowering the minimum wage will reduce inequality. This is illustrated with this graphic, which shows that families making basically $100,000 or less will be (on the whole) better off than they are today with a higher minimum wage.



You'll notice that those in the lowest levels of income get significant increases in their income, and the CBO notes that poverty will be reduced as a result of a higher minimum wage.

[Under a $10.10 minimum wage], real income would increase, on net, by $5 billion for families whose income will be below the poverty threshold under current law, boosting their average family income by about 3 percent and moving about 900,000 people, on net, above the poverty threshold (out of the roughly 45 million people who are projected to be below that threshold under current law).

By comparison, a $9.00 minimum wage would only lift 300,000 out of poverty, so I say $10.10 seems like the way to go, with a good bang for the buck (literally).

What about those folks losing income in the chart? Well, the CBO says this is for a somewhat obvious reason- richer people are more likely live off of stocks and profiteering, and they wouldn't be able to take as much of the added productivity from workers for themselves, since more money would have to go to wages.

According to CBO’s estimates, the increase in earnings for the few low-wage workers living in that...group of families would be more than offset by income reductions, in part because the losses in business income and in real income from price increases would be concentrated in those families.

Of course, this lost income is all of 0.4% of these people's total income, compared to an increase in income of 3% for those in poverty. I think the rich folks will get by, and it's a worthwhile trade.

Those are my big takeaways from the report- a higher minimum wage will raise incomes for 16.5 million Americans, lower poverty, and make work something more likely to be pursued, as there's a higher payoff for entering the work force. And those 500,000 fewer jobs that the righties will constantly yap about? That's more than offset by the people that won't be tied down to a subpar job now that Obamacare removes part of the reason for "job lock." Combine Obamacare and a higher minimum wage, and you all of a sudden have a lot of lower-wage workers with a little more ability to control their own destiny, enabling them to be more likely to pick a job and a wage that's more to their liking.

And that power for workers is the REAL reason the GOP doesn't want a higher minimum wage- they want us to be as desperate as possible, so they can keep wages down and grab as many profits as they can. And you can see how well THAT mentality has worked for us over the last 30+ years. It's time for the tide to be turned back, and raising the minimum wage is a way to do it.