By Robert Samuelson, RCP
The great virtue of the Congressional Budget Office’s recent report on the minimum wage is that it injects a much-needed dose of reality into the debate over job creation. The Obama administration and its congressional allies have taken the position that raising the minimum wage almost 40 percent would have little, if any, adverse effect on jobs. The CBO rejects this view as unlikely. The gap between the administration’s claim and plausible outcomes reveals larger inconsistencies in the White House’s boast that job creation is a top economic priority.
Under the proposal, the federal minimum wage would go from today’s $7.25 to $10.10 by 2016 in three annual steps. Conservatives have argued that this would kill jobs — if government boosts the cost of labor, employers will buy less of it — while doing little to reduce poverty. By and large, the CBO report supports this critique. Here are its main conclusions: