REPORT: A Minimum Wage Increase Would Kill 500,000 Jobs -- But Lift 16.5 Million People's Incomes

A minimum-wage increase to $US10.10 — the level advocated by President Barack Obama and Democrats — would cost about 500,000 jobs but raise earnings for more than 16.5 million low-wage workers by 2016, according to a report released Tuesday by the Congressional Budget Office.

The CBO said in its report that there is a great deal of uncertainty associated with the projection. The office projected a two-thirds chance of the minimum-wage hike’s effect being between a “very slight” reduction in jobs to about 1 million jobs. The 500,000 number is just the central estimate.

House Speaker John Boehner’s (R-Ohio) office pounced on the report to say that a minimum-wage increase would be a job-killer.

“This report confirms what we’ve long known: while helping some, mandating higher wages has real costs, including fewer people working,” said Brendan Buck, a spokesman for Boehner. “With unemployment Americans’ top concern, our focus should be creating — not destroying — jobs for those who need them most.”

The CBO also said that 16.5 million people will see a rise in incomes as a result of the possible hike, something on which Democrats immediately seized.

A $US10.10 minimum wage would lift 900,000 people above the poverty threshold of $US24,100 a year for a family of four, according to the report — a number Democrats seized on. And families in poverty would experience about a $US5 billion increase in real income.

“No matter how the critics spin this report, the CBO made it absolutely clear: raising the minimum wage would lift almost one million Americans out of poverty, increase the pay of low-income workers by $US31 billion, and help build an economy that works for everyone,” House Speaker Nancy Pelosi said in a statement.

The CBO also projected that some higher-wage workers would owe jobs and increased wages to the minimum-wage hike, as it would lead to increased demand for goods and services resulting from the increase.

Here’s a chart from the CBO that summarizes the effects of the possible minimum-wage hike to $US10.10:

The current minimum wage is $US7.25 an hour. A minimum-wage increase is set to be debated in the Senate as soon as next month.

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