Budget and the economy

CBO: Obama’s minimum wage increase would cut employment by 500,000 jobs

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, Rare Staff

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President Obama pushed a $10.10 minimum wage increase during his State of the Union address, but the latest figures from the nonpartisan Congressional Budget Office show this could cut employment by 500,000 workers.

“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,” the CBO announced Tuesday.


“The cold, hard fact is that even in the midst of recovery, too many Americans are working more than ever just to get by, let alone to get ahead,” President Obama said during the State of the Union. “And too many still aren’t working at all. So our job is to reverse these trends.”

Toward this goal, the president announced he would sign an executive order to increase the minimum wage for all federal contract workers. Though, to be fair, federal contract workers do no account for a large percentage of employed Americans.

Still, jobs eliminated will come at the cost of low-skilled, low-wage workers.

“But some jobs for low-wage workers would probably be eliminated, the income of most workers who became jobless would fall substantially, and the share of low-wage workers who were employed would probably fall slightly,” CBO also announced.

Also important, that while $31 billion would go to minimum wage workers, not all minimum wage workers belong to low-wage-earning families, so the effect is not what many liberals would like out of a policy like this.

“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 writes.

At the same time, CBO predicts the wage increase would increase earnings for 16.5 million Americans.

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Betsi Fores is a content editor for Rare. Follow her on Twitter @ejfores.


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