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EDITORIAL: Minimum wage, maximum damage

The administration considers 500,000 jobs lost to be insignificant

- - Wednesday, February 19, 2014

Hold on to your wallet. President Obama is calling on Congress to "give America a raise." Mr. Obama is never so generous as when he's spending someone else's money, so this raise is going to cost us a bundle.

Since last month's State of the Union address, he's been increasingly vocal in pushing for an increase in the minimum wage from $7.25 to $10.10.

Obamanomics sees money as if it were something created out of nowhere. Washington mandates a higher wage, and the result is magical. "This will help families," says the president. "It will give businesses customers with more money to spend. It doesn't involve any new bureaucratic program." He makes it sound like there's no downside.

People who actually run a business understand that the proposed hike represents a 39 percent increase in payroll costs, and the nonpartisan Congressional Budget Office warned on Tuesday that this would destroy a half-million jobs.

The White House was quick to dispatch a team of economists to dispute the finding. "I've been also looking at minimum-wage studies since my very first days at graduate school," said Betsey Stevenson, an economics professor and member the Council of Economic Advisers, "and I really do believe that both the profession and the literature has moved toward thinking over the last couple of decades toward thinking the employment effects are small."

From the comfortable distance of the faculty lounge, the effects may indeed appear "small." Neither Ms. Stevenson, nor any of her colleagues, will find their tenured jobs at risk.

It's a different story for those on the bottom of the income ladder, especially teenagers trying to land their first job.

The Congressional Budget Office's balanced report estimated that about 15 percent of the nation's workforce would see a benefit in the form of higher wages.

Aside from the obvious benefit for some making $7.25, those already making around $10 an hour might also see an increase from the pressure to keep their salaries "more than the minimum."

At the same time, these increases also cause employers to lay off low-wage workers, or hire fewer of them, so the business can make ends meet. The best estimate from the nonpartisan analysts is that 500,000 jobs would be lost overall. The agency noted that was an educated guess, and the true number could be up to a million.

Far from giving consumers more money to spend, as Mr. Obama promises, the Congressional Budget Office report shows the scheme would make everything more expensive and bust the federal budget.

"Prices would rise as a result of a minimum-wage increase, according to CBO's analysis," the report explained. "That increase in prices would raise federal transfer payments, because some of those payments, such as Social Security, are automatically indexed to changes in the price level."

This jobs report could explain the administration's other demand that Congress extend federal emergency unemployment-compensation benefits. Perhaps the president's advisers actually do know that raising the minimum wage would be a job-killer, and they just want to be ready.