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Minimum Wage Kills Jobs! Or Maybe It Doesnt: CBO
February 19, 2014

I’m going to come right out and say it: I’m incensed.  The reason for my ire?  You may have heard that the Congressional Budget Office (CBO) just came out with a report looking at the impact an increase in the minimum wage would have on the economy.  Well, you may have also seen the headlines about this, which tend to read as follows: ‘Raising Minimum Wage Reduces Jobs, Poverty, Study Says,’ (WSJ) or ‘U.S. minimum wage hike would kill jobs but alleviate poverty: CBO’ (Reuters)

Now as you might imagine, I take no umbrage at the estimate that nearly 1 million people will move out of poverty: that’s actually fairly easy to calculate, since we know how many minimum wage workers there are today, and we can therefore realistically project how many people’s annual incomes will increase.  What’s more, I believe strongly that it is morally wrong for someone to work full-time and still live below the poverty line.

No, what has pissed me off is the part about losing 500,000 jobs.  And the reason is simple: that number is a complete and utter misrepresentation of the data.  In fact, the CBO seems to have absolutely no idea how many jobs the increase in minimum wage would kill; they don’t even seem to know if it would kill any at all!  Here’s what they actually say: “…in CBO’s assessment, there is about a two-thirds chance that the effect would be in the range between a very slight reduction in employment to a reduction in employment of 1.0 million workers.” What?  They are saying that they are 66% sure that there will either be no impact at all, or an extremely significant one.  And in the other 33% of scenarios? Based on their projections, we could just as well assume that 1 million jobs will be created.  In other words, their findings are simply worthless.

What is especially galling is that I’ve yet to find a media outlet that has pointed this out.  I mean think about it: everyone is getting hopped up on an estimate that is, at best, a wild guess.  The 500,000 number is about as useful as saying that there’s a 60 percent chance of the weather tomorrow being somewhere between a tropical paradise and a category 5 hurricane.  No one would plan their day based on such idiocy, and neither should we base federal poverty on similarly ludicrous data.

And let’s be clear: this matters.  Politicians are going to use this report to argue against raising the minimum wage, and advocates are already on the defensive.  Equally importantly, the focus on the loss in jobs is overshadowing the fact that nearly 1 million working families will move out of poverty, and it’s critical to note that the CBO report doesn’t cast any doubt on that figure.

So yes, I’m hopping mad, and you should be as well. The lives of million of families, and the fairness of our economy and society, are at stake. We live at a time of unprecedented income inequality, a time when wealth and political power are being concentrated at the top.  We can’t afford to lose momentum on a policy issue that can have so much impact, and we certainly can’t base that policy on ignorance and manipulation.

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