Surprise, surprise: An analysis released today found that a proposed minimum wage hike would eliminate hundreds of thousands of jobs.
Today the Congressional Budget Office (CBO) announced it agreed with the Heritage Foundation’s analysis of President Obama’s proposed minimum wage increase. Of course the CBO did not put it that way. But the agency came to the same conclusion Heritage did: a $10.10 minimum wage has no historical precedent and would jettison hundreds of thousands of jobs.
Many liberals argue that hiking the minimum wage will not cause employers to reduce hiring, but will do just the opposite. They contend it will increase demand, stimulate the economy, and boost hiring. They further argue the minimum wage stood above $10 an hour in the 1960s. Raising it to $10.10 an hour would (supposedly) only return it to this previous level.
The Heritage Foundation found this analysis questionable. The most accurate inflation measures show that the minimum wage has never stood much above $8 an hour. So the President actually proposes hiking the minimum wage one-seventh above its all-time high. That would strongly encourage employers to hire fewer less skilled workers. Heritage Foundation analysis concluded that—even accounting for any stimulus effects—the proposed minimum wage hike would cost 300,000 jobs.
The Congressional Budget Office’s new report concurs. The CBO finds the minimum wage has never stood much above $8 an hour—if analysts use the best available measure of inflation (as CBO and Heritage did). The CBO also found the effects of hiring cutbacks overwhelm any “stimulus” effects from the minimum wage. The agency concluded a $10.10 minimum wage would cost 500,000 jobs—with less than a fifth of those getting higher pay coming from families below the poverty level. If anything, Heritage’s estimates were conservative.
The Congressional Budget Office confirms the President proposes an unprecedented increase in the minimum wage that will cost hundreds of thousands of jobs. This seems highly questionable, especially with the economy struggling with high unemployment.