Minimum wage

wageThe Congressional Budget Office (CBO) is known for careful, factual studies. However the CBO is a creature of Congress and not immune to political influence. Sometimes CBO reports that displease Congress are withdrawn. CBO reports are intended to be educational; they deserve careful study. When politicians cherry-pick these reports, plucking something out of context that seems to their liking, they misuse this valuable resource.

The CBO released a report, dated February 18, 2014, titled “The Effects of a Minimum-Wage Increase on Employment and Family Income.” Politicians immediately seized on information from this report that conforms with their prejudices. Brendan Buck, a spokesman for Speaker John Boehner reportedly said “This report confirms what we’ve long known: while helping some, mandating higher wages has real costs, including fewer people working.”

Here is the paragraph cited:

Effects of the $10.10 Option on Employment and Income — 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 (see the table below). 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.

This CBO report contains other conclusions that show benefits from raising the minimum wage. It is misleading for Speaker Boehner to cite only one conclusion that reflects what he has long known. Those interested in arguments for and against raising the minimum wage should read the report themselves.

The CBO report has 43 pages. It appears to be carefully done and well worth study. It can’t be summarized with one quote taken out of context. Politicians will do that; the public should be wary.

He hasn’t yet, but watch for Tom Reed to cite this report to justify his opposition to raising the minimum wage.  He is all but certain to do that. For another view on the minimum wage question, see the report of Senator Tom Harkin cited below.

© William Hungerford – February 2014

http://www.cbo.gov/publication/44995

http://www.help.senate.gov/newsroom/press/release/?id=7b934fea-7a38-4399-99ec-efc3398658b1&groups=Chair

http://www.nytimes.com/2012/11/02/business/questions-raised-on-withdrawal-of-congressional-research-services-report-on-tax-rates.html?_r=0

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About whungerford

* Contributor at NewNY23rd.com where we discuss the politics, economics, and events of the New New York 23rd Congressional District (Allegany, Cattaraugus, Chautauqua, Chemung, (Eastern) Ontario, Schuyler, Seneca, Steuben,Tioga, Tompkins, and Yates Counties) Please visit and comment on whatever strikes your fancy.
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23 Responses to Minimum wage

  1. BOB MCGILL says:

    You don’t have to be a genius to figure out that when you raise wages you add to the cost of goods and services. All you would be doing is making some people feel good because they think they are making more money, when in time, everything will just COST MORE.

  2. BOB McGILL says:

    One other thing, don’t forget about “AUTOMATION ” ! Corporate America is not stupid, when labor gets too expensive someone comes up with a machine that displaces workers and drives them down into lesser paying jobs or no jabs at all !!!! “-)

  3. philebersole says:

    A blogger named Ian Welsh had something worthwhile to say about the CBO report.

    http://www.ianwelsh.net/ive-never-understood-why-people-care-what-the-cbo-says/

    • whungerford says:

      Thank you.

    • BOB MCGILL says:

      One thing that has been overlooked, what about those on fixed incomes ? Also, when you buy 2 gallons of gas with one hours wages and get a raise, the price of gas goes up and you still can buy 2 gallons of gas with one hours wages, what did you gain ? 🙂

      • whungerford says:

        What happens if the price of gas goes up and you don’t get a raise, Bob?

        • BOB MCGILL says:

          Well, in the past most people drove less and rode bikes, car pooled some even walked. Hell, there is even a free bus in most places ! Dial-a-ride ! Bet ya I can get a free ride in less than 5 minutes !

  4. philebersole says:

    Studies by economists indicate that increases in minimum wage in the United States, and differences in minimum wage between different states, have no effect on employment, or have an effect almost too small to be noticed, or actually increase employment.

    An increase in minimum wage could increase employment because low-wage workers would have more money to spend, this would create more demand for goods and services, and thus more jobs.

    Some employers may think they can’t risk increasing wages on their own, because this would put them at a cost disadvantage with competitors who don’t raise wages. But when wages are increased by law, the playing field is still level and this is not a consideration.

    That’s not to say there would be no effect if you increased minimum wages five-fold or ten-fold, but that’s not what we’re talking about here.

    Here are links to articles about studies of the impact of raising minimum wage.

    http://www.americanprogressaction.org/issues/labor/news/2011/06/07/9747/an-increased-minimum-wage-is-good-policy-even-during-hard-times/

    http://www.americanprogressaction.org/issues/labor/report/2010/11/30/8599/creating-good-jobs-in-our-communities/

    http://www.epi.org/publication/bp357-federal-minimum-wage-increase/

    http://www.ronunz.org/2012/11/15/raising-american-wages-by-raising-american-wages/

    • BOB MCGILL says:

      The report says,

      “An increase in minimum wage could increase employment because low-wage workers would have more money to spend, this would create more demand for goods and services, and thus more jobs. ”
      What it doesn’t say is it would also generate more SALES TAX revenue for the states.

  5. BOB McGILL says:

    Read 3 of your articles. They only talk about job loss and the workers affected by minimum wages. What about where they say a wage increase would put more money into the economy ? Where do you think that money comes from ? If the guy making a burger gets paid more, then the guy eating that burger pays more, aren’t you taking money out of the economy ? My argument IS that you will be driving the cost of living up for everyone. Now you have to increase Social Security, disability, food stamps, pensions and everything else ! There are more people that will be hurt than will be helped.

    • whungerford says:

      The CBO report states: “Once the increases and decreases in income for all workers are taken into account, overall real income would rise by $1 billion.” (This is on page 3 of the report, it is also in the summary.)

      • BOB McGILL says:

        And the government keeps printing and printing money and a loaf of bread that costs $2.48 will cost $2.78.

      • whungerford says:

        Cost increases are discussed and taken into account in the CBO report, Bob.

        The government doesn’t “print money,” that’s an old fashioned idea. The FED regulates the money supply putting more or less into circulation as needed. The government does print paper currency.

      • BOB MCGILL says:

        betsymccaughey.com/coming-hikes-in-minimum-wage-hurts-not-helps-l…‎CachedJan 23, 2013 – He left out the fact that the typical minimum-wage employee is young, with few … works in the restaurant/fast-food industry, where profit margins are thin. Any labor -cost hikes compel these businesses to cut their ‎workforce.

        betsymccaughey.com/coming-hikes-in-minimum-wage-hurts-not-helps-l…

      • whungerford says:

        Bob, the original article, “Minimum Wage,” suggested it is wrong to cherry-pick research for something that matches one’s preconceived notions. Similarly, we shouldn’t cherry-pick articles that support our views as if every instance we find makes us more right. There is no point in doing that.

        • BOB MCGILL says:

          YOU DO IT ALL THE TIME !!! Then when you can’t find anything to support your side you just make something up.
          What if Reed were elected president in the 30’s, give me a break.

          • BOB MCGILL says:

            If I make a wiget and it cost me $13.00 then I add 10% for profit, I make $1.30. Drive my cost up to $15.00 and I add the same 10% for profit, I now make $1.50.
            You hate corporate america, but how did you hurt it by driving up labor costs ?

        • whungerford says:

          I’m glad you enjoyed that article, Bob.

  6. Pingback: Could the CBO Be Wrong? | New NY 23rd

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