The CBO Report on Minimum Wage: What You’re Not Hearing

2014-02-20 Minimum Wage Photoshoot
Applause for lost jobs and inefficient policy gimmicks!

Yesterday the CBO released an analysis of the President’s proposal to hike minimum wage to $10.10 by 2016, and it was more or less a political disaster for the Obama Administration. Why? Because the report indicated that approximately 500,000 jobs would likely be lost due to the impact of the minimum wage hike, leading to headlines like Minimum-wage hike would help alleviate poverty, but could kill jobs, CBO reports, truly bizarre defenses from Democrats that tried to spin job losses into a positive, and some furious push-back against the non-partisan CBO from the Obama Administration. The pushback is a problem in and of itself because the research the Obama Administration cites is primarily about (1) short run effects of (2) one-off minimum wage hikes. The proposed minimum wage hike would be tied to inflation and so the research on past hikes is probably not relevant even in the short-run, and then there’s the problem of longer-run effects…

But forget all that. Here’s the criticism the Obama Administration isn’t having to defend because the media has failed to bring it up even thought it’s right there in the report:

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. [emphasis added]

So, not only will the policy cost about a half-billion jobs, but only 20% of the additional earnings would go to families at or below the poverty line. A full 1/3 would go to families that already make at least 3x the poverty level. Current guidelines (for 2013) put the poverty level at $23,550 for a family of 4, so we’re talking about boosting the income for families that make at least $70,650. I’m not saying that’s a terrible idea or anything, but if this is President Obama’s idea of anti-poverty measure he needs a better one. Like, you know, the EITC which is (a) relatively popular with conservatives and (b) actually targeted at boosting the income of the working poor without costing jobs.

The only reasonable conclusion is that the push for minimum wage is a political gimmick rather than a sincere effort to improve the lot of America’s working poor. Better to pick a popular but stupid program than the GOP will oppose than a lesser known but smart program that the GOP would probably go along with. I guess if Americans have to suffer for the Democratic party to score political points, that’s just tough luck for them. Now that’s what I call empathy.