Hike in Minimum Wage Would Cost 500,000 Jobs, Not Help the Poor Much, Gov't Report Says

A Tuesday report by the Congressional Budget Office estimates that increasing the minimum wage to $10.10 per hour would lead to about 500,000 fewer jobs and most of the benefits would go to those out of poverty than in poverty.

In last month's State of the Union Address, President Barack Obama proposed increasing the minimum wage to $10.10 per hour. The federal minimum wage is currently $7.25.

The report shows that 900,000 workers would be lifted out of poverty under Obama's proposal, but at the cost of 500,000 fewer jobs. Plus, some who are already well above the poverty line would benefit more than those below the poverty line.

The report looks at two options: increasing the minimum wage to $10.10 and $9. The $9 option would reduce the workforce by about 100,000 jobs while the $10.10 option would mean 500,000 fewer jobs, the report estimates.

Taking into account the uncertainty that comes with economic forecasts, the report says that there is a two-thirds chance that the actual impact on employment could be somewhere between a "very slight reduction" in employment to twice as much as the central estimate, or one million jobs.

The report also estimates that the benefits of an increase to $10.10 would mostly go to workers who are already above the poverty line.

Families who benefit from the increase would gain about $31 billion combined. Twenty-nine percent of that amount would go to families who are already earning more than three times the poverty threshold. Only 19 percent of that amount would go to families who currently live below the poverty line.

Though Democrats and the Obama administration have often touted nonpartisan CBO reports in defense of their proposals, this is the second report this month to place Democratic policies in a negative light. A Feb. 4 report found that the Affordable Care Act creates a disincentive to work that adds up to the equivalent of about two million full-time jobs (including both reduced hours and job losses) by 2017.

Some Democrats have already stated that they will make increasing the minimum wage a central theme in the 2014 elections.

In response, the White House attempted to place the report in the best possible light.

"The new Congressional Budget Office report finds that 16.5 million workers would get a raise from increasing the minimum wage to $10.10 per hour and this would help millions of hard-working families, reduce poverty, and increase the overall wages going to lower-income households," a White House blog post states.

While citing the parts of the report showing that some Americans would benefit, the White House also argued that the CBO report is flawed.

"The bulk of academic studies," the post continued, "have concluded that the effects on employment of minimum wage increases in the range now under consideration are likely to be small to nonexistent."