CBO Validates Conservatives Again – Minimum Wage Hike Means Lost Jobs

February 19, 2014

By Akash Chougule

Yesterday, the non-partisan Congressional Budget Office (CBO) again validated a claim that conservatives have been making about a current public policy issue. This time, the CBO concluded that raising the minimum wage to $10.10 would reduce total employment by about 500,000 workers — and would disproportionately hurt low-wage workers. Americans for Prosperity opposed Senator Tom Harkin’s bill seeking to raise the minimum wage to $10.10. It represents yet another instance in which the left espouses a policy that will hurt many of the same people they purport to help. The CBO report confirms that in order to protect social mobility and opportunity in the economy, Congress should not mandate an increase in the minimum wage.

Raising the minimum wage would hurt those who need economic opportunity the most. As the CBO confirmed, a minimum wage hike would eliminate many low-wage jobs, increasing unemployment and decreasing income for low-wage workers. The logic behind this projection is simple. As the minimum wage rises, workers must become more productive to remain valuable. A worker who produces $8 per hour worth of goods or services is profitable under the current minimum wage. But with a $10.10 minimum wage, this worker is a loss for the company, and it is in the interest of the company’s profitability to let that employee go.

The least productive employees, the ones least likely to produce $10.10 worth of value and get laid off, are the ones with the weakest skill set — the most vulnerable segment of the workforce. A minimum wage hike presents a barrier to them entering the workforce in the first place, and makes it more difficult for them to maintain employment. In short, while some of their peers will see raises, many low-wage workers will see pink slips.

The elimination of half a million jobs is not the only way a minimum wage hike would hurt low-wage workers. It would also mean a reduction in real income for consumers facing higher prices that result from the increase in the cost of labor. Furthermore, of the benefit that results from a minimum wage hike, just 19 percent would accrue to families with earnings below the poverty threshold – compared to 29 percent accruing to families earning more than three times the poverty threshold. This is because “many low-wage workers are not members of low-income families,” as the CBO report states.

The CBO confirms that a minimum wage hike would be the latest in a string of “progressive” policies that hurt the prospect of the American Dream. The nonpartisan government agency’s report comes less than a month after they concluded that the President’s healthcare law could eliminate over two million jobs.

With the economy still sputtering, grappling with high unemployment and a labor force participation rate that has dwindled to its lowest level since the 1970’s, the federal government should not be moving legislation that harms job growth. The “Land of Opportunity” cannot empower people to climb the ladder if the ladder is out of reach to begin with.

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