This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

CBO Says Minimum Wage Hike Reduces Employment, Raises Wages; White House Defends $10.10 Option

NEW YORK (TheStreet) -- The Congressional Budget Office, a nonpartisan federal agency, reported Tuesday that a minimum wage hike would reduce employment and boost families' incomes.

The results come amid a debate between Democrats and Republicans in Washington as to whether the United States should increase the minimum wage requirements -- an argument that could have serious ramifications for control of the House and Senate during the 2014 midterm elections.

The CBO examined the wage-hike effects based on two scenarios: a $10.10 option versus a $9 option.

In the fully implemented $10.10 minimum, the agency found a central estimate of about 500,000 workers would lose their jobs, while boosting income for low-wage workers by $31 billion. However, the CBO said just $5.89 billion of that estimate would accrue for families living below the poverty threshold.

The likely series of employment scenarios for the $10.10 option ranged from a "very slight decrease" to 1 million jobs cuts.

In the fully implemented $9 minimum wage -- a policy President Barack Obama endorsed early last year -- the CBO reported a central estimate of about 100,000 workers would lose work, while income for families living below the poverty line would gain by $1 billion. This, the report said, would lift 300,000 people out of poverty.

Employment scenarios for the $9 option ranged from a "very slight decrease" to a loss of 200,000 jobs.

Republicans quickly endorsed the CBO report as confirmation that higher wages would hurt the labor situation.

"This report confirms what we've long known: while helping some, mandating higher wages has real costs, including fewer people working," Brendan Buck, a spokesman for House Speaker John Boehner, wrote in a statement to reporters.

The White House Tuesday afternoon held a conference call with reporters to defend its position to raise the federal minimum wage to $10.10.

The CBO's estimates on employment for the $10.10 minimum wage don't reflect the overall consensus view of economists, said Jason Furman, chairman of the Council of Economic Advisors.

Furman repeatedly said the CBO's estimates did not reflect the consensus of 64 empirical economic studies the White House has used to support its claim that boosting the minimum wage would have a neutral effect on employment.

"When it comes to employment, I think [the CBO] are not restating what I would understand the consensus to be, and that's where I think there's some respectful disagreement on the emphasis and the certainty around that magnitude of employment loss," Furman said.

When reporters asked if, politically, it would be easier for the White House to convince members of Congress to raise the minimum wage to $9 instead of the $10.10 Obama currently is endorsing, Furman dodged a direct answer. Instead, Furman said the $10.10 hike would boost more families above the poverty line and reiterated that the CBO report on employment did not represent the view of most economists.

Last February, 34% of economists polled by the Chicago Booth School of Business said they agreed that a $9 minimum wage would make it more difficult for low-skilled workers to find jobs. Some 32% disagreed. But what also stuck out in the report was that 24% of the economists said they were uncertain -- a sign of the broad distribution of opinion among economists on the topic.

The present federal minimum wage sits at $7.25 an hour, which the government implemented in July 2009. This increased the previous minimum of $6.55 an hour set in July 2008.

Minimum wage since 2007 has risen nearly 24%, whereas during the 10 years prior to that it rose about 14%.

-- Written by Joe Deaux in New York.

>Contact by Email.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $128.46 0.00%
FB $78.97 0.00%
GOOG $558.40 0.00%
TSLA $203.34 0.00%
YHOO $44.28 0.00%

Markets

DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs