Minimum Wage Repercussions

   Watch for conservatives to kick up a fuss over a boost in the minimum wage as they cite a new study warning of a reduction in jobs.
   President Obama has said that by executive order, he would put in place a rise in the federal minimum wage to $10.10 an hour. A study by the Congressional Budget Office notes that because of this hike, "some jobs for low wage workers would probably be eliminated." Not only that, the CBO said, but "the income of most workers who became jobless would fall substantially."
   Hmmm. Lose your job and your income drops. Brilliant.

   Cue the shrieks of "Danger, danger, warning!" as the Republican Righteous Robots take up the talking points.
   However, they would be ignoring several key points in the CBO study, released today. The increase from the current $7.25 hourly wage to $10.10 would be in three yearly steps, so the new level would not be fully effective until 2016. Second, the President's plan would apply initially only to companies signing government contracts. More important, the boost would increase family income, such that the family would rise above the federal poverty level.
   Even so, boosting the minimum pay to the entire nation would not be the disaster some predict.
   As for reducing total employment, that would take three years and the reduction would be about 300,000 workers, or 0.3 percent. Moreover, while it could be more, it could just as likely be less.
   Moreover, higher-wage workers would also benefit from increased job security as the new minimum wage boosts demand for goods and services. In addition, many workers who would benefit from the pay hike are not members of low-income families.
   Realistically, it must be admitted that the mandate for higher pay would cause higher prices as firms pass on the cost to consumers. But those at the minimum pay level would also be more able to purchase necessities.

   Another option being considered would increase the federal minimum wage to $9 an hour in two steps, next year and the year after. And while the first, $10.10 plan, would subsequently see annual adjustments to account for inflation, the $9 option would not see inflation boosts. And this option would reduce employment by about 100,000 workers, or less than 0.1 percent, the CBO said.
   On net, the nonpartisan agency noted, most families would see an increase in income. As for families that would see a drop in income because of the new minimum, that would affect only families with income six times the federal poverty level, and would lower the average family income by about 0.1 percent.
   Current government guidelines put the poverty line for a family of four at $23,850. Do the math: Six times that yields yearly income of $133,100. So because of the minimum wage hike, the family as a whole would suffer an income loss of $1,331.
   Another tragedy.

   As for the effect on the federal budget as government workers get pay hikes or as others lose their jobs and government revenue goes down, the CBO said it was "unclear whether effect for the coming decade as a whole would be a small increase or a small decrease in budget deficits."