Minimum wage hike would kill a half-million jobs: CBO

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Raising the minimum wage to $10.10 an hour will cost the U.S. economy a half-million jobs by 2016 but will substantially boost wages for most low-income workers, according to a Congressional Budget Office report released Tuesday that adds a significant hurdle to Democrats’ push for an increase.

Stung by the findings, the White House, which is still facing a sluggish job picture five years after the recession, scrambled for a response. It praised the nonpartisan agency’s finding that low-wage workers’ income would rise but said the CBO job numbers “do not reflect the overall consensus view of economists.”

Republicans predicted that the CBO report will bolster opposition on Capitol Hill, where the issue is likely to come up for votes in the next few weeks.

“Raising the minimum wage would slash jobs and harm an already fragile workforce,” said Sen. John Cornyn, Texas Republican. “Whether it’s Obamacare, a minimum wage hike, or a trillion-dollar stimulus bill charged to the nation’s credit card, the bottom line is the president’s big-government experiment kills jobs.”

The report marks the second time this month that the CBO has caused headaches for President Obama’s domestic agenda. A previous report found that by 2017, Obamacare would create economic incentives that would cause 2 million people to drop out of the labor force.

In Tuesday’s report, the CBO said that raising the hourly minimum wage to $10.10, phased in over the next three years — the proposal Mr. Obama and other Democrats are pushing — would cost about 500,000 jobs.

“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 nonpartisan scorekeepers said.

The report added that the uncertainty is substantial and the loss could be anywhere from “very slight” to as much as 1 million jobs.

The CBO said a wage increase would cause some businesses to cut the number of jobs to contain labor costs, although most of the working poor would benefit and many would be lifted above the poverty line.

Overall, income would be transferred from the wealthy to the poor, CBO said.

“Once the other changes in income were taken into account, families whose income would be below six times the poverty threshold under current law would see a small increase in income, on net, and families whose income would be higher under current law would see reductions in income, on net,” the analysts reported.

With most of the big spending and debt issues settled for this year, and with Republicans focusing on attacks to Obamacare, Democrats are countering with a campaign on income inequality. The two chief prongs have been an effort to extend long-term federal unemployment benefits and the push to raise the minimum wage.

Mr. Obama has mentioned it repeatedly in recent days, and Senate Democrats have said they will force a vote in the near future. House Democrats, who are in the minority in their chamber, emerged from their annual policy retreat last week to announce that they will undertake an official petition drive to try to force the issue to the House floor over the Republican majority’s objections.

White House economists tried to pick apart the CBO analysis, saying economic scholars have found that minimum wage increases don’t cause major job losses.

Betsey Stevenson, a member of the White House Council of Economic Advisers, said while that goes against traditional economic teaching, there is plenty of evidence that boosting wages also increases productivity and job stability.

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