WASHINGTON (USA TODAY) - 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 today by the non-partisan Congressional Budget Office.
The White House and congressional Democrats--who are seeking to make a federal minimum wage hike a top issue in the 2014 elections--took issue with the politically sensitive report and said CBO's findings are inconsistent with the prevailing view among economists that raising the minimum wage does not impact employment.
"Zero is a perfectly reasonable estimate of the impact of the minimum wage on employment ," countered Council of Economic Advisers Chairman Jason Furman in a conference call with reporters in response to the CBO report.
Obama initially called on Congress to raise the $7.25 hourly minimum wage to $9, but he has since rallied with leading Senate Democrats who are pushing for a $10.10 increase. The Democratic-controlled Senate is expected to vote on a wage increase in March, but it is unlikely to get a vote in the GOP-controlled House.
Raising the minimum wage gets broad public support in polls, but it faces near unanimous opposition from congressional Republicans. Democrats are expected to use the issue on the campaign trail in the midterm elections.
A Gallup poll released Monday showed that nearly one in four Americans say that jobs and unemployment are their top concern, underscoring Democrats' sensitivity to the CBO's conclusion that a wage increase could result in job losses.
CBO examined the budget impacts of raising the minimum wage to $9 and $10.10. The report concluded that a $9 increase 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. A $10.10 increase would lift 900,000 workers above the poverty line, but cost 500,000 jobs.
Furman and Betsey Stevenson, also a member of the Council of Economic Advisers, said the CBO analysis does not take in to account the impacts of higher wages on increasing productivity, reducing turnover and absenteeism and improving worker output. "I think that that understanding has moved employment effects to zero," she said, "I think CBO didn't fully appreciate that in their review."
Republicans were quick to highlight the report's warning of job losses.
"This report confirms what we've long known: while helping some, mandating higher wages has real costs, including fewer people working. With unemployment Americans' top concern, our focus should be creating - not destroying - jobs for those who need them most," said Brendan Buck, a spokesman for House Speaker John Boehner, R-Ohio.
Minority Leader Nancy Pelosi, D-Calif., joined the White House in questioning the veracity of the CBO report, citing competing economic consensus that a wage increase would be an economic stimulus and boost jobs. "What's more, in past years, the CBO itself has acknowledged the uncertainty of its own predictions and ignored new perspectives in the wide array of analysis on the minimum wage," she said.
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."
Senate Health, Education, Labor and Pensions Chairman Tom Harkin, D-Iowa, the sponsor of legislation to raise the wage to $10.10, issued a lengthy critique of the CBO report.
"More than 600 economists, including seven Nobel Prize laureates, recently affirmed the growing consensus that low-wage workers benefit from modest increases in the minimum wage without negative consequences for the low-wage job market," Harkin said, adding that his legislation would increase wages for 28 million workers, and create 85,000 new jobs.