Report: Minimum wage boost would cost jobs, lower poverty

Iowa lawmakers still at odds over whether increases would cause job loss

Ed Tibbetts
Published: February 18 2014 | 5:37 pm - Updated: 29 March 2014 | 3:50 am in

A new nonpartisan analysis says boosting the country's minimum wage to $10.10 an hour would result in the loss of roughly 500,000 jobs, even as it lifts hundreds of thousands of Americans out of poverty by the time it's fully implemented.

U.S. Sen. Tom Harkin, D-Iowa, a chief backer of the increase, disputed the idea that jobs would be lost. Meanwhile, Republicans and Democrats sought to highlight the parts of the report that buttressed their arguments.

The Congressional Budget Office report said the lost jobs would come as a result of raising the cost of employment. And although it acknowledged the increased demand that would follow a higher minimum wage would also create employment, on net it wouldn't be enough to offset the losses.

The current minimum wage is $7.25 an hour. In some states, including Illinois, it is higher, at $8.25 per hour.

A loss of 500,000 jobs in the American economy would represent 0.3 percent of total employment, the budget office said. But the prediction also comes at a time of uneven job growth.

The report also said that 16.5 million Americans would get a raise as a result of a higher minimum wage and that 900,000 people would be lifted out of poverty by it by 2016, or about 2 percent of the people below the threshold.

Harkin's office praised that part of the report but said the budget office study was an "outlier" when it came to its employment projections. He pointed to a review of 64 minimum wage studies published in the British Journal of Industrial Relations in 2009 that said minimum wages didn't cause job losses.

"Since the first minimum wage was enacted more than 75 years ago, opponents have argued that a wage floor would cause job loss," Harkin said Tuesday. "But this is a myth."

Republicans said the projected job losses come at a time when Americans are worried about the economy.

Republican state Sen. Joni Ernst, R-Red Oak, who is running for the U.S. Senate, responded to the report in an email, saying, "government and government-mandated wage increases are not the solution — especially when doing so comes at the expense of the jobs of hard working Americans."

Alissa Ohl, a spokeswoman for Republican Mark Jacobs, also responded in an email: "Like Senator Grassley, Mark thinks that's something we can look at but, as Mark has said from day one, the real problem in America is a lack of good jobs."

Rep. Bruce Braley, who is running for the Senate this fall, has, like Harkin, pushed for the increase.

Drew Pusateri, a spokesman, said, "Bruce believes that Iowans who go out and work tough jobs shouldn’t come home and find their families living in poverty — and this report shows that’s the reality for far too many Americans."

He said 340,000 Iowans would get a raise from the proposal.

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