WASHINGTON - Increasing the U.S. minimum wage has the potential to lift about 900,000 Americans out of poverty while leading to as many as 1 million job losses, according to a report from the Congressional Budget Office.
The report is the second this month that injects the nonpartisan budget office into a political fight in Congress. Like the office’s Feb. 4 report on President Barack Obama’s health-care law, leaders from each party said the wage report reinforced their positions.
“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 Republican House Speaker John Boehner, who opposes a minimum-wage increase.
Rep. Chris Van Hollen, the top Democrat on the House Budget Committee, said the report “confirms that raising the minimum wage is in the best interest of our country.”
Increasing the minimum wage to $10.10 an hour from the current $7.25 has been a top priority for Obama, who has said the widening gap between rich and poor is a “fundamental threat to the American dream.”
Jason Furman, chairman of the White House Council of Economic Advisers, took issue Tuesday with the budget office’s findings on how raising the minimum wage would affect jobs, saying it doesn’t reflect the consensus view of economists.
Most studies say “the effects on employment of minimum-wage increases in the range now under consideration are likely to be small to nonexistent,” Furman wrote on the White House website. “CBO also agrees that the employment effect could be essentially zero, but their central estimates are not reflective of a consensus of the economics profession.”
Other parts of the budget office’s report support raising the minimum wage, including its conclusions that a higher wage would directly benefit 16.5 million workers and boost the economy by raising consumption, Furman and Council of Economic Advisers member Betsey Stevenson wrote on the website.
The leisure and hospitality sector would be the most affected by a higher minimum wage, according to a Bloomberg Industries analysis. About 51 percent of all minimum-wage workers were employed in the sector in 2012, and 70 percent of those workers were in regions where the average wage was higher than $10.10.
The budget office report estimated that companies would shed about 500,000 jobs by late 2016 as businesses cut the higher costs from payrolls. The amount could be larger or smaller, it said, ranging from a “very slight reduction” to losses of about 1 million.
Companies, including Darden Restaurants Inc., which owns Red Lobster and Olive Garden, cited a potential minimum-wage increase as a risk factor in filings with the U.S. Securities and Exchange Commission. Others, such as Costco Wholesale Corp., back the change, saying it would help reduce turnover and increase productivity.
“This report confirms what we’ve long known: while helping some, mandating higher wages has real costs, including fewer people working,” Buck said in an emailed statement.
The change would increase income by $5 billion for families that would fall below the poverty threshold under current law, the budget office said. Their average family income would be boosted by about 3 percent, and about 900,000 people would be moved out of poverty, according to the budget office.
“Raising the minimum wage would lift almost 1 million Americans out of poverty, increase the pay of low-income workers by $31 billion, and help build an economy that works for everyone,” House Minority Leader Nancy Pelosi, D-Calif., said in a statement.
Front Section, Pages 3 on 02/19/2014