Economists have done a lot of research on the effects of raising the minimum wage, with the best of that research using real-life examples. It’s not actually hard to find a place that’s raised the minimum wage, after all—29 states and the District of Columbia have done so, in addition to historical data from increases at the federal level, as well as international data. In 2019, University of Massachusetts economist Arindrajit Dube did major review of the data for the government of the United Kingdom, finding “minimum wages in a range of countries have had a negligible or zero effect on jobs, but significantly increased the earnings of the lowest paid.”
Monday, the Congressional Budget Office (CBO) came out with its guess on the effects of the minimum wage gradually rising to $15, and once again, the CBO ignored the bulk of the economic research showing what has already happened as a result of minimum wage increases. The CBO agrees with the best available economic research that a lot of people will get raises as a result of a gradual increase to $15, and projects 900,000 will be lifted out of poverty. But the CBO projects a number of job losses—1.4 million—that is simply not supported by the cutting edge research into, again, what has already happened.
How did they do that? Dube notes that the latest report “UPweighted more negative studies,” despite, in at least one case, evidence having emerged since the negative study to call its results into question. Even a recent review of the available data by noted minimum wage increase opponents David Neumark and Peter Shirley “had a median estimate of -0.15 for directly affected workers, less than half the size of the CBO assumption,” the Economic Policy Institute’s Ben Zipperer pointed out.
Jesse Rothstein, a University of California at Berkeley economist and former chief economist at the U.S. Department of Labor, tweeted: “It isn't clear to me why CBO seems to be putting its thumb on the scale. But its estimates seem far out of line with professional opinion.”
That’s the basic thing: The CBO is picking and choosing the data that makes a minimum wage increase look worse—and still finding that it would lead to a 10-year wage increase of $333 billion for low-wage workers and 900,000 fewer people in poverty.
Senate Budget Committee Chair Bernie Sanders highlighted another weird shift in the CBO’s predictions for a minimum wage increase, saying in a statement: “I find it hard to understand how the CBO concluded that raising the minimum wage would increase the deficit by $54 billion. Two years ago, CBO concluded that a $15 minimum wage would increase the deficit by less than $1 million over ten years. Further, several major studies done by the Center on Wage and Employment Dynamics and the Economic Policy Institute both found that raising the minimum wage would amount to a significant reduction in the deficit.”
But, Sanders continued, there’s good news for the prospect of passing the Raise the Wage Act through reconciliation in the Senate, because “from a Byrd Rule perspective, the CBO has demonstrated that increasing the minimum wage would have a direct and substantial impact on the federal budget. What that means is that we can clearly raise the minimum wage to $15 an hour under the rules of reconciliation.”
And it’s going to have to be reconciliation, because as Sanders also said, “We are never going to get 10 Republicans to increase the minimum wage through ‘regular order.’” Republicans support a starvation wage. That’s not going to change anytime soon.
