Boosting the minimum wage to $10.10 nationwide likely would lead to an estimated 500,000 fewer workers in the economy, according to a Tuesday report from the Congressional Budget Office. Opponents of a higher minimum wage seized upon that figure to bolster their position. Meanwhile, proponents of a higher minimum wage, including the White House, responded that this estimate does not reflect the consensus view among economists.
CBO Director Doug Elmendorf on Wednesday morning defended the nonpartisan agency’s report against that claim.
“Our analysis is quite consistent with the latest thinking by economists,” Elmendorf said at a breakfast with reporters.
The White House, along with many congressional Democrats, backs a proposal to raise the minimum wage to $10.10 per hour. In a Tuesday afternoon call, White House Council of Economic Advisers Chairman Jason Furman and council member Betsey Stevenson criticized the report, with Stevenson saying she believes the CBO is “not fully appreciating how much the literature has moved” on the minimum wage.
Stevenson said she thinks the CBO was not taking into account that a higher wage would boost productivity and reduce worker absenteeism and turnover. In a blog post, she and Furman also pointed to a January letter, now signed by 600 economists, which cites “the weight of evidence now showing that increases in the minimum wage have had little or no negative effect on the employment of minimum-wage workers.”
Elmendorf responded by saying the letter was signed by economists who already tend to back a higher minimum wage and added that the letter is not exact in its claims.
“Those economists don’t put numbers to their words, so it’s hard to know exactly what people meant by ‘little to no effect,’” he said.
He likewise cautioned against drawing conclusions from a 2013 poll of economists that gives ammunition to opponents of a higher minimum wage. In that poll, 34 percent of economists agreed that raising the minimum wage to $9 per hour would make it “noticeably harder for low-skilled workers to find employment,” while 32 percent disagreed and 24 percent were uncertain. Elmendorf pointed out that it’s impossible to know what those economists meant by “noticeably harder.”
While the report’s job-loss estimate of 500,000 is perhaps the number that has gained the most attention, Elmendorf put that number into perspective, stressing that the minimum wage would boost earnings for far more people than are estimated to lose jobs.
“By our estimates … something like 97 or 99 percent of the people who would be affected by an increase in a minimum wage would receive higher wages, and their family incomes would be higher,” he said. “But at the same time, 1 percent, 3 percent of people would not be able to find employment.”
According to the report, a $10.10 minimum wage hike would boost the weekly earnings of an estimated 16.5 million hourly workers and reduce the number of Americans in poverty by 900,000. In addition, the report provided a range of job-loss estimates. While the central estimate is 500,000 jobs lost, there is a two-thirds chance that a $10.10 minimum wage would create anywhere from a slight reduction in workers to a reduction of 1 million.
Elmendorf said this also means there is a roughly one-sixth chance that a $10.10 minimum wage would add zero or more workers to the economy, and likewise that there is a one-sixth chance it could subtract more than 1 million workers.