Boosting the federal minimum wage as President Barack Obama and congressional Democrats are proposing would increase earnings for more than 16.5 million people by 2016 but also cut employment by roughly 500,000 workers, Congress' nonpartisan budget analyst said Tuesday.
The report by the Congressional Budget Office was released as the Senate prepares to debate a Democratic proposal to gradually boost today's $7.25 hourly minimum wage to $10.10 by 2016. The proposal is backed by Obama, but faces strong Republican opposition and long odds of approval by Congress.
The analysis immediately added fuel to the partisan dispute over the proposal. It put authoritative weight behind long-time GOP claims that increasing the minimum wage would cost jobs by forcing companies to spend more on wages.
“This report confirms what we've long known: While helping some, mandating higher wages has real costs, including fewer people working,” said Brendan Buck, spokesman for House Speaker John Boehner, R-Ohio. “With unemployment Americans' top concern, our focus should be creating — not destroying — jobs for those who need them most.”
Democrats have said such claims are overblown and outweighed by the benefits to workers and the overall economy as low-paid employees spend more money. Sen. Tom Harkin, D-Iowa, author of the Senate legislation, cited other research concluding that a higher minimum wage would create jobs, not reduce them.
“And as the CBO report affirms, an increase in the minimum wage will help lift families out of poverty,” Harkin said.
The report said as a result of the minimum wage increase, there would be 900,000 fewer people living below the federal poverty line.
The CBO study examined a proposal similar to Harkin's and focused on the plan's impact in late 2016, when it would take full effect. After 2016, Harkin's bill would require the minimum wage to be increased annually to reflect rising inflation.
The analysts said their estimate of employment losses was approximate. They said the actual impact could range from a very slight employment reduction to a loss of 1 million workers.
The report said that besides boosting wages for people earning less than $10.10 hourly, some people making more than that amount would also see higher earnings as bosses adjust their pay scales upward.