Following through on his State of the Union promise to move ahead with or without Congress, President Obama signed an executive order last week raising the minimum wage for federal contractors from $7.25/hour to $10.10, the same increased rate that Senator Reid (D-NV) keeps threatening to bring up for a vote on the Senate floor
It’s really too bad that the President didn’t wait for the Congressional Budget Office (CBO) to do some number crunching before acting, because contrary to Sen. Reid’s boast that hiking the minimum wage would create “85,000 new jobs,” a CBO report unveiled yesterday confirms minimum wage skeptics worst fears:
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.
In layman’s terms, implementing a $10.10/hour minimum wage would risk losing half a million jobs. The fact that the CBO tempers their estimate with the caveat that it could range from just a few lost jobs up to 1 million jobs should hardly be comforting. Either way the result is the same: hiking the minimum wage is a jobs killer.
Higher unemployment is the last thing our struggling economy needs – doing anything that risks more lost jobs is tantamount to economic malpractice. Rather than relentlessly pursuing policies that flirt with disaster, Senator Reid and the rest of Congress should be focused on reforms that save and create jobs such as repealing the death tax, lowering the corporate tax rate, rolling back burdensome regulations, and even the big one: repealing ObamaCare, which the CBO estimated earlier this month could cut 2.5 million jobs from the economy.
Given the current state of affairs on Capitol Hill, it’s unlikely the House and Senate could successfully implement the above reforms. Still taxpayers can hope that Senator Reid heeds the latest warnings from CBO.