Bickering About the Minimum Wage

by Dave Schuler on February 20, 2014

The bickering about increasing the minimum wage continues, stirred up by the CBO report I mentioned yesterday. See here and here, for a taste of the discussion.

If anything, the CBO’s report convinces me that a 40% increase in the minimum wage would be problematic. The report rather clearly states that a 24% increase would destroy significantly fewer jobs than a 40% increase would. And a close reading of the report suggests that much of the benefit of a minimum wage increase would be realized by white teenagers living at home with Mommie and Daddy in reasonably prosperous circumstances while the pain would be born by black teenagers. I don’t find that an acceptable outcome.

I pointed out some of the shortcomings in the CBO report yesterday. There’s one thing that puzzles me. The 500,000 jobs lost figure for a 40% increase in the minimum wage seems to be a brute force, split-the-difference figure between zero jobs lost and a million jobs lost. Does the CBO really believe that all of the probabilities from zero to a million are equally likely?

Update

Alexis Simendinger read it the same way I do. If there’s an increase in the minimum wage, it might well be to $9.00 rather than to $10.10.

{ 3 comments… read them below or add one }

PD Shaw February 20, 2014 at 10:34 am

From my perspective, the CBO analysis was worse than expected because I am skeptical that increasing the minimum wage causes job losses, as opposed to reduces future job growth. And I think the CBO agrees, but apparently finds long-term studies too difficult to construct:

“Employment reductions after a minimum-wage increase are probably larger over a longer term, in part because those reductions may be less attributable to the elimination of existing low-wage jobs than to slower growth in the number of low-wage jobs, which is difficult to detect in short-term studies.”

I wouldn’t support a hike with such a weak job market, but a compromise would be to trigger an increase to improved unemployment levels (U6).

Sam February 20, 2014 at 10:45 am

I support an expanded EITC based on hours worked. I think Republican wonks are being disingenuous when they promote it as an alternative without also saying it would need to be paid for somehow.

Ben Wolf February 22, 2014 at 5:18 am

The CBO took studies from across the board which showed relative insensitivity to the minimum wage regarding employment and somehow arrived at the conclusion of enhanced sensitivity. I would not take that 500,000 figure as reliable.

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