CBO’s Ambiguous Minimum Wage Statistics

The Wall Street Journal, New York Times and Washington Post all reported about the CBO’s recent minimum wage report. There is one important piece of information to take away from it. If the government were to raise the minimum wage to $10.10, 16.5 million people, who work low-wage jobs will have better salaries, but 500,000 people will lose their jobs. Annie Lowrey of the Times mentions that it would bring 900,000 families out of poverty.

If one were to analyze these numbers, a few conclusions could be drawn. One of them being that millions of people will have better salaries to live off of. Another conclusion is that 900,000 families will be lifted out of poverty, but 500,000 people will lose their jobs. Let’s assume that the families of the 500,000 people, who would lose their jobs, would sink into poverty. Using simple math, we could conclude that 400,000 fewer families will be under the poverty line. That is the way I see it.

This can be construed in two ways. On one hand, it does seem that this raise in the minimum wage would save more people than it would hurt. It would also reduce poverty in the country. 400,000 fewer families could be saved from poverty. This could mean that consumption would be stimulated and the economy could recover at a better rate than it has recently.

On the other hand, 500,000 people will lose their jobs. This will add to the nation’s existing problem that is unemployment. This has been a problem since the recession, so about five and a half years. The unemployment rate could rise to a dangerous level. It would not be fair to the those 500,000 families who sink into poverty because their breadwinners lost their jobs. It would be reasonable to think that these families would view the results of this new wage to be unfair. Essentially, this could create a vicious cycle of poverty and unemployment. Some people could be saved with a higher wage, while others end up paying the price.

In my opinion, this raise in the wage seems like a bad idea. Although some families are saved, others end up suffering. There is a trade-off between poor families and families to be lifted out of poverty. A family that ends up experiencing negative effects of this wage will wonder something along the lines of “why me?” or “what did I do to deserve this?”. We cannot make people better off without making others worse off.

 

3 thoughts on “CBO’s Ambiguous Minimum Wage Statistics

  1. awerther

    I saw this report as well earlier today. Prior to this I was more of a proponent of the minimum wage increase, but with this new research I think it is much harder to say we should raise the minimum wage for sure. Like you said, it would be devastating for those $500,000 families that get completely screwed by such an increase, and totally unfair as well. But life isn’t always fair, so it will be interesting to see what happens.

  2. Max Huppertz

    Good piece, and on an interesting topic. I do think that the 900,000 people who CBO predicts will be lifted above the poverty line are net of everything else, so also net of the 500,000 employees who are supposed to lose their jobs. In other words, even taking what happens to these 500,000 into account, 900,000 people would have an income increase that lifts them above the poverty line.
    I’d favor wage subsidies over a minimum wage increase, to be honest. They seem to make more sense on lots of levels. But when talking about the new CBO figures and debating a minimum wage increase, we should remember that unfairness can be counterfactual as well. By which I mean that yes, 500,000 people have every right to complain if you raise the minimum wage and they lose their jobs. But say you don’t raise it; don’t those 900,000 people who could be leaving the poverty line behind have every right to complain as well?
    At any rate, it’s, as you say, not a clear-cut case by any means.

  3. cjamesj

    Much like the ambiguous statistics, I tend to sway back and forth over a minimum wage hike. I think that it should be rolled out in a small test community representative of the nation. Once the results are back on the test market the government should look at the strengths and weaknesses of the results and make a decision to move forward.

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