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Raising Federal Minimum Wage Would Benefit Majority of Low-Wage Workers, CBO Finds

Gina-Marie Cheeseman
| Friday February 21st, 2014 | 0 Comments

Minimum Wage Protesters While many conservatives and conservative think tanks claim that raising the federal minimum wage would bring only negative consequences, an analysis by the Congressional Budget Office (CBO) shows otherwise.

The CBO, a non-partisan group that analyzes congressional bills, analyzed the effects of increasing the minimum wage and concluded that it would increase the pay and family income for most low-wage workers. The increased earnings for low-wage workers would be $31 billion, by CBO’s estimate.

Overall real income for all low-wage workers would increase by $2 billion, and real income would increase by $5 billion for workers whose income is below the poverty threshold. Raising the minimum wage would move about 900,000 people above the poverty line. The CBO also found that raising the federal minimum wage would slightly reduce employment by about 500,000 workers, or 0.3 percent. However, changes in the economy for goods and services might offset the employment decrease. As the CBO points out, “The families that experience increases in income tend to raise their consumption.”

During President Barack Obama’s State of the Union address last month, he promised to sign an executive order raising the minimum wage for federal contractors to $10.10 an hour from its current $7 an hour.  A few weeks later, Obama made good on that promise and signed the executive order which affects about 100,000 workers. It will go into effect next January.

Obama is not satisfied with only raising the minimum wage for federal contractors. In both his State of the Union and his weekly address last week he has called on Congress to pass a bill that would raise the federal minimum wage to $10.10. Raising the minimum wage would “lift millions of Americans out of poverty, and help millions more work their way out of poverty–without requiring a single dollar in new taxes or spending,” Obama said during his Feb. 15 weekly address. He added that increasing the federal minimum wage would “give more businesses more customers with more money to spend–and that means growing the economy for everyone.”

An analysis in 2013 by the Economic Policy Institute (EPI) finds that raising the minimum wage would “help reverse the ongoing erosion of wages that has contributed significantly to growing income inequality” while providing a “modest stimulus to the entire economy.” Increasing the federal minimum wage to $10.10 by July 1, 2015 would raise the wage of about 30 million workers by about $32.6 billion and create about 140,000 new jobs over the phase in period.

Those who would see wage increases do not fit the stereotypes of minimum wage workers, as more than 88 percent are at least 20-years-old, about 44 percent have at least some college education, only 14.2 percent are part-time workers and more than half (54.5 percent) work full time (35 or more hours a week). And Obama is right in stating that women would be most affected, as the EPI found that women make up 56 percent of low-wage workers. The EPI states on its website that it is a nonprofit, non-partisan think tank created in 1986.

Many economists agree with the findings of the CBO and the EPI, as a 2013 survey of leading economists by University of Chicago’s Booth School of Business found. The economists surveyed agreed by almost a four-to-one margin that raising the minimum wage has more benefits than costs. Sen. Tom Harkin (D-Iowa), who introduced a bill to increase the federal minimum wage to $10.10, also agrees. On MSNBC’s “Morning Joe” show, he said that it’s “goofy stuff” to claim that increasing the federal minimum wage will cause workers’ hours to be cut or reduce employment. Instead, he said that raising the minimum wage would help the overall economy because minimum wage workers “tend to spend their money.”

Image credit: Flickr/The All-Nite Images


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