Obama's Minimum Wage Boost Will Result In Even More Job Losses, CBO Finds

Tyler Durden's picture

In the aftermath of the crushing humiliation from two weeks ago when the bipartisan (if perpetually wrong) Congressional Budget Office found that Obamacare would result in an additional 2.5 million job losses over the next decade, all else equal, one would think that the administration would, and should, do everything to make sure that the CBO is sufficiently incentivized, monetarily if need be (wink wink) to avoid such embarrassing incidents of truthiness in the future. One would not think that Obama would turn the other cheek and eagerly anticipate yet another roundhouse punch to the face just days later. Yet that is precisely what happened.

Minutes ago, the CBO issued another stunner of a report, looking at the impact of the minimum wage boost proposal from $7.25 to $10.10 (which at least when it comes to Federal workers is nothing more than a populist gimmick since as we showed previously the average Federal worker makes nearly twice as much as the average American). The punchline: while income would be boosted for about 16.5 million workers or a grand amount of about $31 billion, "the income of most workers who became jobless would fall substantially, and the share of low-wage workers who were employed would probably fall slightly." And the cherry on top: as much as an additional 1 million jobs would be lost by the end of 2016.

All in a day's work for central-planning.

The summary findings in a nutshell, er, nutchart:

The longer version:

Increasing the minimum wage would have two principal effects on low-wage workers. Most of them would receive higher pay that would increase their family’s income, and some of those families would see their income rise above the federal poverty threshold. But some jobs for low-wage workers would probably be eliminated, the income of most workers who became jobless would fall substantially, and the share of low-wage workers who were employed would probably fall slightly.

What Options for Increasing the Minimum Wage Did CBO Examine?

For this report, CBO examined the effects on employment and family income of two options for increasing the federal minimum wage (see the figure below):

  • A “$10.10 option” would increase the federal minimum wage from its current rate of $7.25 per hour to $10.10 per hour in three steps—in 2014, 2015, and 2016. After reaching $10.10 in 2016, the minimum wage would be adjusted annually for inflation as measured by the consumer price index.
  • A “$9.00 option” would raise the federal minimum wage from $7.25 per hour to $9.00 per hour in two steps—in 2015 and 2016. After reaching $9.00 in 2016, the minimum wage would not be subsequently adjusted for inflation.

Workers' Hourly Wages and the Federal Minimum Wage


What Effects Would Those Options Have?

The $10.10 option would have substantially larger effects on employment and income than the $9.00 option would—because more workers would see their wages rise; the change in their wages would be greater; and, CBO expects, employment would be more responsive to a minimum-wage increase that was larger and was subsequently adjusted for inflation. The net effect of either option on the federal budget would probably be small.


Effects of the $10.10 Option on Employment and Income


Once fully implemented in the second half of 2016, the $10.10 option would reduce total employment by about 500,000 workers, or 0.3 percent, CBO projects (see the table below). As with any such estimates, however, the actual losses could be smaller or larger; in CBO’s assessment, there is about a two-thirds chance that the effect would be in the range between a very slight reduction in employment and a reduction in employment of 1.0 million workers.

Estimated Effects on Employment of an Increase in the Federal Minimum Wage, Second Half of 2016


Many more low-wage workers would see an increase in their earnings. Of those workers who will earn up to $10.10 under current law, most—about 16.5 million, according to CBO’s estimates—would have higher earnings during an average week in the second half of 2016 if the $10.10 option was implemented. Some of the people earning slightly more than $10.10 would also have higher earnings under that option, for reasons discussed below. Further, a few higher-wage workers would owe their jobs and increased earnings to the heightened demand for goods and services that would result from the minimum-wage increase.


The increased earnings for low-wage workers resulting from the higher minimum wage would total $31 billion, by CBO’s estimate. However, those earnings would not go only to low-income families, because many low-wage workers are not members of low-income families. Just 19 percent of the $31 billion would accrue to families with earnings below the poverty threshold, whereas 29 percent would accrue to families earning more than three times the poverty threshold, CBO estimates.

It gets worse:

Moreover, the increased earnings for some workers would be accompanied by reductions in real (inflation-adjusted) income for the people who became jobless because of the minimum-wage increase, for business owners, and for consumers facing higher prices. CBO examined family income overall and for various income groups, reaching the following conclusions (see the figure below):

Then there is the question of the impact on the Federal budget:

In addition to affecting employment and family income, increasing the federal minimum wage would affect the federal budget directly by increasing the wages that the federal government paid to a small number of hourly employees and indirectly by boosting the prices of some goods and services purchased by the government. Most of those costs would need to be covered by discretionary appropriations, which are capped through 2021 under current law.


Federal spending and taxes would also be indirectly affected by the increases in real income for some people and the reduction in real income for others. As a group, workers with increased earnings would pay more in taxes and receive less in federal benefits of certain types than they would have otherwise. However, people who became jobless because of the minimum-wage increase, business owners, and consumers facing higher prices would see a reduction in real income and would collectively pay less in taxes and receive more in federal benefits than they would have otherwise. CBO concludes that the net effect on the federal budget of raising the minimum wage would probably be a small decrease in budget deficits for several years but a small increase in budget deficits thereafter. It is unclear whether the effect for the coming decade as a whole would be a small increase or a small decrease in budget deficits.

Obviously, it is not rocket science - except to some very confused Keynesians - that hiking minimum wages always results in job losses, and as for the federal deficit in 10 years, the last entity whose opinion we want to hear about this is of course, the CBO, which in 2001 had forecast that 2011 debt would be negative $2.4 trillion.

Of course, the political backlash has already started. The Hill reports:

The office of Speaker John Boehner (R-Ohio) was quick to seize on the CBO finding.


“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 Boehner spokesman Brendan Buck.

And, as expected, the democrats were furious. Again.

But Sen. Tom Harkin (D-Iowa), the lead sponsor of the Senate bill to raise the minimum wage, took issue with the CBO's findings.


“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.


“In fact, an analysis of the Fair Minimum Wage Act reveals that gradually raising the minimum wage to $10.10 would raise the wages of nearly 28 million low-wage workers, pumping $22 billion in the economy and—contrary to the CBO’s report— would create 85,000 jobs over three years due to increased consumer demand.”


Democrats are making the wage hike a central part of their midterm election argument, and Senate Majority Leader Harry Reid (D-Nev.) has said he will bring a minimum wage bill to the floor in the coming weeks.

Surely there is nothing quite like running on an agenda of even more job losses to assure re-election.

Finally, here is the White House.

No comment necessary.

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quasimodo's picture

He's a dipshit at best. This is surprising why?

DaddyO's picture

My comments on minimum wage got fileted in an ealier post by all the statist shills and now Tyler comes to my rescue.


ZerOhead's picture


The gift that keeps on taking...

jcaz's picture

Votes cost money....

But hey, I won't lose my ObamaPhone over this, will I?

Ok then.....

pods's picture

This does not even take any fancy charts or initials after your name to figure out.

If your job's break even max wage (to your employer) is below the new minimum, your job is toast.

Simple as that.  

Willful disregard for these simple axioms does not make them irrevelant.  

I just had a premonition:  A hotline for people to call up and rat out companies that are not stocking enough items in the store, and TP is in short supply.




macholatte's picture


The punchline: while income would be boosted for about 16.5 million workers or a grand amount of about $31 billion,


simple arithmetic:

The punchline: while Democrat votes would be boosted by about 16.5 million numbskulls which would cost everyone only about $31 billion but not one penny from the DNC.

James_Cole's picture

If your job's break even max wage (to your employer) is below the new minimum, your job is toast.

Simple as that.  

Yes, simple as that, they get to fuck you on both sides. Endless taxpayer cash and subsidies for business (not causing inflation - wink wink), free market for the peons. Oh, but don't worry. We're right on the cusp of getting rid of crony capitalism. Right on the cusp! In the meantime, enjoy your collapsing purchasing power.

Interesting how corporate America was rescued in 2008 by the US taxpayer and turned around and had record profits - thank Gawd. But wages? Ah fuck that noise, that's the peons! Why worry about that? Let the market decide! And guess what, the market has decided. With unemployment nice and high, you're fucked bitchez. 

pods's picture

I can see where you are coming from, but there is no way that coersion (government) is going to help those on the lowest rung of the pay scale by these measures.

Either businesses will increase prices to maintain a suitable profit margin (if they can) or the workers get it in the poopchute.

Nothing like the government fucking the hell out of you for your own good.
Why is it people don't mind being fucked if the fucker had good intentions?  

I am against all of these mafia tactics by government and big business.

But I am not going to condone a good old fucking for the weak because I FEEL like it helps them.

Sorry, results matter, and if you raise the minimum wage certain things happen:

1. Those below that wage see their jobs eliminated.

2.  Everyone above the minimum get a pay cut because costs are going to rise.

3.  Feel good assholes will get to parade around being praised, while secretly being the Ether Bunny.



johnQpublic's picture

kinda like assuring your high school girlfriend you wont get her pregnant....

because you are fucking her in the ass

James_Cole's picture

Nothing like the government fucking the hell out of you for your own good. Why is it people don't mind being fucked if the fucker had good intentions?  

If it was a choice between cutting .gov subsidies to crony buddies vs. minimum wage I'd be 100% for the former. But that's not on the table. The way it works is the squeaky wheel gets the grease. Why do all these multinationals get so many favours out of .govs? Because they have armies of lobbyists. 

I was living in a place where they had a debate about equivalent to raising the minimum wage, predictable arguments on both sides including the 'unemployment is gonna jump'. Anyway, there was a big labour union that lobbied hard and got the increase. And unemployment? It actually went down. Unrelated to the increase sure, but it just shows the economy is much more complicated than a few factors. 

johnQpublic's picture

why bis it that the consensus is always wrong?


though it is the CBO so they are also prolly wrong

could be much worse, based on their previous work

BLOTTO's picture

Our 5...5ive dollar foot longggg is about to cost 12 dollars to compensate.

skwid vacuous's picture

i am making vacuum packed bags of all the veggies scraped from subway footlongs, thx subway... 

johnQpublic's picture

only thingi like about subway is you can get as much green pepper on your sandwich as you want

Rick Blaine's picture

Obama is a dipshit...

He should've gone for $20/hr...

...for everyone...

...even those who don't have a job.

Now, THAT would REALLY get this economy roaring.

tempo's picture

My grandson tells me that he will rack up the largest amount of student loans allowed and stay in school as long as possible because its a lot more fun than working a crap job. He believes the Government will eventually allow all student debt to be eliminated in bankruptcy and paid by taxpayers.

Tall Tom's picture

You grandson sounds like he deserves his enslavement. (I am really very sorry....very sorry to read that.)


The Government will not allow for that as when they can indebt you then they can keep you enslaved. That is the plan. He is deluded.


Are you going to allow that?


Have him read my response.

AmCockerSpaniel's picture

>>>>  minimum wage boost proposal from $7.25 to $10.10 (which at least when it comes to Federal workers is nothing more than a populist gimmick since as we showed previously the average Federal worker makes nearly twice as much as the average American) <<<<<


This minimum wage boost was for the workers who are working for contractors, and are not

dirrect Fed workers. If we want them to be clean, then we must be clean. So nothing will happen

till new contracts are signed, or the old ones opened to shift the cost to the Fed.

LawsofPhysics's picture

My god, I need a job that allows me to deliver plus or minus 100% of what I promise...

Fire everyone, start over.

Hippocratic Oaf's picture

Putting more people on the street and higher inflation for all?

This is good?

LawsofPhysics's picture

Yes, especially if they simply stop looking for work, the employment rate will go up.

Is that you Obama? 


Lendo's picture

Don't let emotion get in the way of facts.

This ship is sinking, get out of USD.

cougar_w's picture

They now have to raise wages to get the inflation numbers they need. If they have to fund it, they'll print money and give it to Main Street (via tax incentives) to pay the higher wages and boost consumer spending. That is called "unsterilized QE" and without it the US economy will enter a consumption-failure-driven deflationary apocalypse at the bottom of which is the destruction of the entire US economy.

It's not going to work. Too little, too late. Wall Street got everything, kept everything, and the rest of us are now dust.

Anybody doesn't get this -- or cannot see the desperation this wage move represents -- is in for a really nasty shock.


Winston Churchill's picture

Going to need a bigger helicopter.

Grande Tetons's picture

New pilot, TD....Captain Yellen. Unless they need two helicopters that is. 

cougar_w's picture

And don't forget:

Cougar_w: Thu, 05/24/2012 - 17:18

Hope you didn't put much money on that bet, Dawg. These fuckers are going to print hard enough to wake the dead. They'll print like mo'fos, print like mad men, print like fly pimps. Print until their eyes bleed.

They will print via the swaps, via bank bailouts and mergers, via fixed Treasury yields, via real honest-to-God negative interest rates, via loans to banks on no collateral, via payroll tax reductions, and in the end via actual fiat paper instruments which they might very well drop in bails from actual mutherfucking helicopters.

They will not give two figs what anyone thinks.

Here is why.

Because this is the Goddamned end of it my friend. There is no accounting beyond this point. There will be no history of it. No one to take notes of rates of exchange, or of the graft and violence, nobody to worry about the deficit or the GDP or the national debt of any nation large or small under the blazing Goddamned sun.

End. Of. It. Does anyone bitch about how Rome totally debased their coinage at the end? Hell no. But whoever did it had enough to hand and grabbed some land with a nice vineyard and sat back and waited for the Middle Ages to start 700 years further on.

And that's what a singularity is about. Anything that passes through is striped of all meaning. Nothing we think is important now will remain so beyond the event horizon. Nobody will remember, nobody will write about it, nobody will be held to any standard. Ever for evar.

So yeah, they'll print like the mad crazed terrorists they are. Because they have nothing to lose, and maybe something to gain. Maybe a dollar. Maybe a day. Maybe a slim chance to escape with some of the loot. Whatever the fuck advantage they see in it, for themselves and their elite crap wanking buddies, they will full-on-full-time-fucking do it to advantage.

Watch for it, Dawg. It's totally on this time, on like Donkey Kong. And when the dust is settled in a generation hence it's going to have become  another unbelievable episode among the ages of men.

ZerOhead's picture

Yup... that's pretty much it.

Walter E Kurtz's picture

This is probably one of my all time favorite comments on ZH. I have it saved to file and review it and other comments frequently. Thanks for bringing it back.

cougar_w's picture

It is probably one of your favorites exactly because I spam ZH with it every 6 months :) The power or propaganda.

Actually, I'm gaming G**gle. I want the search engines to associate that rant with any contextual mention of qualitative easing and money printing so that future generations wondering what the Sam Hill happened will at least have to admit that there was a bunch of crazy malcontents who saw it coming, and even knew they saw it coming.

All_Is_Well's picture

Best comment of all time on ZH...

Tall Tom's picture



You know the reason behind the effort to raise the Minimum Wage is that they are seeking to raise Social Security and Medicare Tax Revenues.


This is not about helping the poor. This is an attempt to keep the insolvent Unemployment Insurance, Social Security and Medicare programs funded.


Since FICA, FUTA, and Medicare Taxes are charged as a percentage of Gross, and since Gross Wages increase as a result of a hike in the Minimum Wage then it follows that the Revenues will increase.


But you know that it will fail as people will be laid off as a result of the hike.


This needs to be exposed. Many miss this. They see that the Government is attempting to "Help" the poor. But they are only interested in extending the Ponzi Scam.


You need to write an article about this.


Man we are so screwed. I am doing the best that I can to educate as many as I know. But even Peter Schiff misses the underlying motivation.

LawsofPhysics's picture

Still won't help.  If you were to just hand out money, hand it out to people and businesses that have been fiscally responsible.  Stop rewarding bad behavior!!  For example, everyone that is current on a mortage, or paid one off and is current on their property taxes gets $200,000.  If you've been an irresponsible dumbass, fuck off.  I guarrantee many of those people would spend more on other things if they knew they had no mortgage to pay.

The fact that every single fucking "plan" rewards bad behavior tells you everything you need to know about the true intent.

cougar_w's picture

What you are calling "bad behavior" was for the 60 years before called "the triumph of democracy."

Not saying you are wrong. Just noting that framing is 100% of the game.

LawsofPhysics's picture

Well for starters, If a company or institution goes bankrupt under your management, you should be the first one to pay back the creditors, then the owners, then the shareholders no fucking bailouts, period.

These fucks always justify their lavish lifestyles by saying "they accept all the risk"?

Bullshit, there is no risk when uncle Sam is backstopping your shit.

James_Cole's picture

Bullshit, there is no risk when uncle Sam is backstopping your shit.

Risk is for the little people.

centerline's picture

Yup.  Shoring up the base - which in this case only buys a little more time at even greater expense.  Expect as many such tricks as can be pulled off along the way.


Greenskeeper_Carl's picture

i think its also about buying more time for social security/medicade. All these people will still get most of the money paid in taxes back, since they will still not mke much money, but the money paid into those ponzi programs doesnt come back in a tax return. This is just a way for the govt to extend and pretend ith these programs for a few more years. Maybe im reading too much into this, but I wouldnt put it past them. First they start with this MyRA thing, tricking low income people into buying govt debt, then they raise their wages by edict, allowing them to take more money out of the economy and into their ponzi scheme at the little guys expense. It always hurts the bottom segment of society too. Same as always

centerline's picture

Shit, the ink isn't even dry on this latest move and the CBO already has a report out on it?

It just reeks of a desperation move for short term gains including the upcoming 2014 election cycle.



cougar_w's picture

They know something they think we don't.

I think it means they intend to knock the chair out from under this economy, and let it fall to its death, sometime in the next 4 months.

Yes all in time for the election cycle.

The player who consistently controls the center of the chessboard, wins. To control the center you have to plan a dozen times a dozen moves ahead at least. That's called controlling the game. Obama's handlers are playing the system like a chessmaster. Obama himself has no skill whatever, except that he knows exactly how to jump when told to jump. But his handlers have some small skill, I'll grant them that. It will not prove enough.

They think they know all this and we don't.

And that is how they lost control of the center of the board. What comes next is fire.

Winston Churchill's picture

Agree with your timetable.
Its obvious its going to crash anyway pretty soon,
so they want to control the timing.
Fits with the 'dead men tell no tales' scenario unfolding.
A pandemic of suicided bankers may be our only tell.

ZerOhead's picture

Correct but missing ONE important point.

As this consumption drained, under-producing and banked out economy collapses into something resembling deflation (it isn't... it's actually DEATH) while prices for food energy etc. (the necessities of life) explode...

Yellen and Fischer will be pumping trillions into the TBTF banks yet again in an attempt to "save the system" which will then effectively transfer all known wealth to the financial elite in a hyperinflationary wave that will immediately render the debt used to amass all these strategic assets worthless.

The perfect heist.

cougar_w's picture

However there is a possible end game here that you should not lose sight of.

They wanted the loot, and now they have the loot. All of it. However the same system in which "the loot" had any meaning and value is now in terminal decline. To them it must feel like winning the lottery the same day the lottery system declares bankruptcy.

The criminal financial system overshot the goal. They now need to back-pedal as hard as they can to try and save the thing they were just yesterday raping to death.

Too little. Too late.

Everyone is going to cry. But the fuckers who ended up with all the loot just in time to lose it in a sucking deflationary cyclone are waking to a living nightmare, snatching defeat from the jaws of victory, and the weak among them are going to kill themselves from grief.

ZerOhead's picture

As I have said before... it's going to be a bitch for them to find caviar and fuel for their private jets when the planet is in flames.

Back-peddling is simply not possible at this point and not one of these fuckers will admit that their insatiable greed and corruption had anything to do with the collapse.

A very close personal friend of mine cracked into the Forbes billionaire list in 2013. Very nice guy to his friends... but otherwise a pure sociopath.

We are all fucked and there is not a thing that can be done because the real problem lies not in political or economic systems but in human nature itself.

centerline's picture

I wager that most of the sociopathic assholes who are aware that the shit has hit the fan think they can control what is going on to some degree.  The majority though are just blinded by ego, greed, etc. and are clawing at everything they can to live like rock starts - hookers and blow, fast cars, big boats and bigger houses.  One big free-for-all, fuck-your-neighbor, winner takes all world.

In reality, it just adds up to noise.  In the grand scheme of things - human nature considering - the sum of all these actions are exactly what creates these (historic, repeating) cycles.  This one is a real bitch... massive overshoot facilitated by cheap energy and technology.


ZerOhead's picture

You have learned well young jedi.

Cheap energy and technological evolution is what has allowed us all to live in the most extraordinary of times with a high level of prosperity. It freed us from the enormous amounts of manual labor that used to be used in agriculture, resource extraction, transportation, manufacturing etc. etc.

Cheap debt was the magic that allowed us to all live beyond our means when we collectively stopped producing and focused our economies on consuming the labors of others.

Now the correction component of the cycle is repeating again... and this one is not going to be pleasant for Western civilization as we know it.


centerline's picture

So many other places in the world who are dependant on Western Civilizian for food, medicine, etc. are going to be quickly decimated.  Not sure where it will be the worst.  Or the timing.  Just that it is coming.

The way I look at it is that the paths of an organized implosion or a desperation play to keep the party going both end with a crisis.  Only a truly controlled deflation on a world scale could prevent sudden shocks and draw out what is coming over the decades it would take (perhaps longer).  And that isn't going to happen.  The world is just too dynamic and there are too many people pulling in different directions trying to game everything.  Overshoot - which includes synthetic growth as you mentioned (credit/debt) - in my opinion guarantees a more explosive outcome.

Wish I saw it differenty.  But nothing so far has convinced me otherwise.  Nor does this make me a doomer or negative.  Just trying to wrestle with the data and see where it leads me.  And hoping that information (technology) is the game changer... a chance we might take a step forward as a species at some point.

cougar_w's picture

All we need to do to pay off the debt is discover a use for crude oil. I'm telling ya the stuff is all over the place, seeps out of the ground in places. Hell I bet you can find it it that God-forsaken sand trap Arabia if you looked for it.

I hear it burns. Can you imagine the uses we can come up with for a liquid that actually burns? That's free for the taking? That people want to get rid of? No more whaling for oil. No more boiling fat. Forget that crap. We're only limited by our imagination friends.

Crude oil. Out of the ground. God was a fucking genious, man.

Sky is the limit. I'm telling ya.

i_call_you_my_base's picture

"the income of most workers who became jobless would fall substantially"

Very counterintuitive.