




Minimum Wage CBO





Loss of 500,000 Jobs

Let's go straight to the CBO Report on Minimum Wages to get some numbers.


Minimum wage CBO2

According to CBO’s central estimate, implementing the $10.10 option would reduce employment by roughly 500,000 workers in the second half of 2016, relative to what would happen under current law. 10 That decrease would be the net result of two effects: a slightly larger decrease in jobs for low-wage workers (because of their higher cost) and an increase of a few tens of thousands of jobs for other workers (because of greater demand for goods and services).

By CBO’s estimate, about 1½ per- cent of the 33 million workers who otherwise would have earned less than $11.50 per hour would be jobless— either because they lost a job or because they could not find a job—as a result of the increase in the minimum wage. Those job losses among low-wage workers would be concentrated among people who are projected to earn less than $10.10 an hour under current law. Some workers who would otherwise have earned between $10.10 and $11.50 per hour would also see an increase in their wages, which would tend to reduce their employment as well, CBO estimates.

Politically Speaking

The Hill chimed in on the issue in its report Minimum wage hike to cost 500K jobs, boost income









Common Sense vs. Research Papers

Proponents of higher minimum wage laws cite studies that purportedly show hiking the minimum wage does not cost jobs.

For example, Barry Ritholtz recently linked to a couple of Minimum Wage: Research Papers that purportedly show higher minimum wages have no effect on hiring.

Such reports defy simple economic realities and common sense.

Although small differences in local minimum wages may not have much of an effect, I wonder if the studies properly take into account property tax differentials, local tax incentives, and the simple fact that wages generally rise over time regardless of minimum wage hikes.

Regardless, such studies cannot show the unseen: what would have happened in the absence of a wage hikes.

Finally, the proposed minimum wage hike from $7.25 to $10.10 is a massive 39.3% increase. And that would come on top of Obamacare penalties.


Economic Reality

If owners of stores have to pay more for workers, they have less incentive to expand.

Here's the critical question: How many stores will Walmart, Pizza Hut, McDonalds, Wendy's etc., not open that they would have otherwise if the minimum wage rockets up to $10.10?

Common sense says it's a substantial number. It has to be. Stores that are marginal at one labor price point will be outright unprofitable at another labor price point. That is simple economic reality.

No unflawed study can possibly show otherwise.
