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What Did CBO Really Say about the Minimum Wage?

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Written by Nicole Woo   
Tuesday, 11 March 2014 15:04

Tomorrow morning (March 12), the Senate Health, Education, Labor & Pensions Committee will hold a hearing titled "From Poverty to Opportunity: How a Fair Minimum Wage Will Help Working Families Succeed." The witnesses will range from the Secretary to Labor, to a renowned economist, to a Catholic nun.

Douglas Elmendorf, director of the Congressional Budget Office, will also be testifying.  He'll likely be presenting the results of a recent CBO study on the effects of a minimum wage increase. That report generated a lot of media attention, mostly for its projection that a raise to $10.10 per hour would "reduce total employment by about 500,000 workers, or 0.3 percent."

When the report was released, CEPR's Dean Baker and John Schmitt provided timely and detailed analyses of the CBO's report.  Dean pointed out that:

"The CBO projections imply that 500,000 fewer people will be employed at low wage jobs. It did not say that 500,000 people would lose their jobs. This is an important distinction....

[R]ather, the projection implies that workers are likely to find it more difficult to find new jobs when they leave an old job or when they first enter the workforce. With 25 million people projected to be in the pool of beneficiaries from a higher minimum wage, this means that we can expect affected workers to put in on average about 2 percent fewer hours a year. However when they do work, those at the bottom will see a 39.3 percent increase in pay."

John noted that on almost every issue in dispute, the CBO embraced arguments made by supporters of a higher minimum wage. The only major exception – which dominated the media coverage – was with respect to the employment effects of a minimum-wage increase, where, as John describes it, "the CBO decided to saw the baby in half."

For tomorrow's Senate hearing, John has submitted a statement for the record, which you can read here.  It pulls together the analyses contained in two blog posts, CBO and the Minimum Wage and CBO and the Minimum Wage, PT. 2.

So, tune in on Wednesday at 9 am EDT to the Senate HELP Committee's live webcast of the hearing!

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