Budget office: Hike in minimum wage would help some families out of poverty

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The CBO has reviewed proposed increases in the minimum wage.

The Congressional Budget Office on Feb. 18 released its analysis of two options to rising the minimum wage in the United States.

The CBO reviewed the “$10.10 option” and a “$9 option.”

In its review, the CBO said increasing the minimum wage would “have two principal effects on low-wage workers.”

Most workers, the report said, would receive higher pay that would increase their family’s income, and some of those families would see their income rise above the federal poverty threshold. However, some low-wage jobs would probably be eliminated and the share of low-wage workers who were employed would probably fall slightly.

The “$10.10 option” would increase the federal minimum wage from $7.25 per hour to $10.10 per hour in three steps — in 2014, 2015, and 2016. After reaching $10.10 in 2016, the minimum wage would be adjusted annually for inflation.

The “$9 option” would raise the federal minimum wage to $9.00 per hour in two steps — in 2015 and 2016 — but it would not be automatically adjusted afterward for inflation.

The CBO said once fully implemented in the second half of 2016, the $10.10 option could reduce total employment by about 500,000 workers, or 0.3 percent. There is about a two-thirds chance that the effect would be in the range between a very slight reduction in employment and a reduction in employment of 1 million workers.

The CBO said many more low-wage workers would see an increase in their earnings.

Also, some higher-wage workers would owe their jobs and increased earnings to the heightened demand for goods and services that would result from the minimum-wage increase.

The increased earnings for low-wage workers resulting from the higher minimum wage would total $31 billion.

Once the increases and decreases in income for all workers are taken into account, overall real income would rise by $2 billion, the CBO said.

The $9.00 option would reduce employment by about 100,000 workers, or by less than 0.1 percent, CBO projected. There is about a two-thirds chance that the effect would be in the range between a very slight increase in employment and a reduction in employment of 200,000 workers.

The increased earnings for low-wage workers resulting from the higher minimum wage would total $9 billion.

Once the increases and decreases in income for all workers are taken into account, overall real income would rise by $1 billion.

In addition to affecting employment and family income, increasing the federal minimum wage would affect the federal budget directly by increasing the wages that the federal government paid to a small number of hourly employees and indirectly by boosting the prices of some goods and services purchased by the government.

Most of those costs would need to be covered by discretionary appropriations, which are capped through 2021 under current law.