NCPA - National Center for Policy Analysis

Minimum Wage Hike Could Cost 500,000 Jobs

February 20, 2014

President Obama's call to raise the federal minimum wage could help lift 900,000 workers out of poverty, but at a cost of as many as 500,000 jobs, according to an analysis released by the non-partisan Congressional Budget Office (CBO), says USA Today.

  • CBO examined the budget impacts of raising the minimum wage to $9 per hour and $10.10 per hour.
  • The report concluded that an increase to $9 per hour would lift 300,000 workers above the poverty line, but cost 100,000 new jobs as employers are expected to reduce workforces to make up for higher wages.
  • An increase to $10.10 per hour would lift 900,000 workers above the poverty line, but cost 500,000 jobs.

The CBO report acknowledges that long-term conclusions on the effect of the minimum wage are difficult to predict. In 2007 -- the last time Congress voted to raise the federal minimum wage to the current $7.25 rate -- CBO reported that "the potential employment and unemployment impacts of raising the federal minimum wage rate to $7.25 per hour are difficult to predict, but are likely to be small."

Source: Susan Davis, "CBO Report: Minimum Wage Hike Could Cost 500,000 Jobs," USA Today, February 18, 2014. "The Effects of a Minimum-Wage Increase on Employment and Family Income," Congressional Budget Office, February 18, 2014.

 

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