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Bernstein: Minimum Wage Increase Is Significant Net Plus for Low-Wage Workers

February 19, 2014 at 7:35 PM
BY
CBPP

“[O]n balance, low- and moderate-income Americans are big winners from a higher minimum wage, which would raise earnings and incomes, lower poverty and inequality, and do so at no net cost to the federal budget,” CBPP Senior Fellow Jared Bernstein writes in summarizing the Congressional Budget Office’s (CBO) new minimum wage analysis.  CBO estimates that raising the minimum wage to $10.10 by the second half of 2016 would directly benefit 16.5 million workers and lift 900,000 people out of poverty, though it also would reduce total employment by about 500,000.

His post, at the New York Times’ Economix blog, concludes:

There is no policy I can think of that generates only benefits without any costs, and policy makers always have to weigh the two sides.  In the case of the minimum wage, on the benefits side of ledger, the budget office shows that 16.5 million low-wage workers would directly get a much-needed pay increase at no cost to the federal budget.  Though the budget agency did not analyze longer-term results for these workers, it’s also the case that when those displaced by the increase get their next low-wage job, they too will benefit from a higher paycheck than would otherwise be the case.

As I’ve stressed many times on this blog, policy makers need to be concerned about the quantity of jobs, and pursue policies that will increase that number.  But they also have to worry about job quality, especially in the low-wage sector, where the decline in the real value of the minimum wage, the increase in earnings inequality (meaning less growth finds its way to the low end of the wage scale), and the low bargaining power of the work force have placed strong, negative pressure on wage trends for decades.

With such job-quality concerns in mind, I’d say the long history of research shows that increasing the minimum wage is a simple, effective policy that achieves its goal of raising the value of low-wage work with minimal distortions at no cost to the federal budget.  The Congressional Budget Office report further confirms that conclusion.

Click here for the full post.