Feb. 19 (Bloomberg) -- Boosting the minimum wage may cost as many as 500,000 people their jobs, said a new report from Congress’s financial scorekeeper that diminishes chances for an agreement on one of President Barack Obama’s priorities.
The effort by Obama and Senate Democrats to raise the minimum wage to $10.10 an hour already faced opposition in the Republican-led House. Yesterday’s report from the Congressional Budget Office provided more fodder for Republicans who have been arguing the proposal would kill jobs.
“This is going to give some angst to Democrats,” said former Representative Bart Stupak, a Michigan Democrat.
The report also showed that raising the minimum wage from $7.25 an hour may lift about 900,000 Americans out of poverty, supporting Democrats’ arguments in favor of the legislation.
Still, Republicans said the potential job losses outweighed those findings. Brendan Buck, a spokesman for House Speaker John Boehner, said the CBO report “confirms what we’ve long known.”
“With unemployment Americans’ top concern, our focus should be creating -- not destroying -- jobs for those who need them most,” Buck said in a statement.
Maurice “Hank” Greenberg, a Republican donor and former chief executive officer of American International Group Inc., said his party was on the wrong side of the issue. A Jan. 8 poll by Quinnipiac University found that 71 percent of Americans, including 52 percent of Republicans, support a higher minimum wage.
“The Republicans must not be viewed as the party that killed it,” Greenberg said today in a Bloomberg Television interview. “If they do that, they’re going to have a tough time in the forthcoming elections. So from a practical point of view I’d hope they’d get it done.”
A campaign built around raising the minimum wage can help Democrats win political races in battleground states, said Richard Trumka, president of the AFL-CIO federation of 56 unions with 12.5 million members.
“Raising wages for Americans, for all workers, is the issue of our time and hopefully will be the issue of this election,” Trumka said today on a conference call with reporters. “They can yell all they want but this is a winning issue.”
The change would most affect leisure and hospitality companies, which employed 51 percent of minimum-wage workers in 2012, according to a Bloomberg Government analysis. At least 50 companies and industry groups are lobbying Congress on the issue, including Yum! Brands Inc., the operator of Kentucky Fried Chicken and Taco Bell restaurants.
Companies, including Darden Restaurants Inc., which owns Red Lobster and Olive Garden, cite 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.
Senate Majority Leader Harry Reid, a Nevada Democrat, plans to bring a minimum wage increase proposal to the Senate floor in March. In a statement, he emphasized a finding in the report that the move would increase pay for 16 million Americans.
“The Koch brothers made over $18 billion in 2013 alone, but middle-class families have watched their incomes stagnate for decades,” Reid said, referring to billionaire energy executives Charles and David Koch, supporters of the small-government Tea Party.
“Our economy should work for everyone, not just the top 1 percent,” Reid said.
The proposal, backed by Senator Tom Harkin, an Iowa Democrat, is opposed by Boehner. The Ohio Republican told reporters Jan. 28 that raising the minimum wage is “bad policy.”
The report is the second this month that injects the nonpartisan budget office into a political fight in Congress. A Feb. 4 report from CBO showed Obamacare will reduce hours Americans work.
Jason Furman, chairman of the White House Council of Economic Advisers, yesterday took issue with the CBO’s findings on how raising the wage would affect jobs, saying it doesn’t reflect the consensus view of economists.
Most studies show that minimum wage increases have little or no effects on employment, he said on a conference call with reporters yesterday.
“There are dozens and dozens of other studies on the minimum wage that we can draw and infer from,” Furman said, adding that the White House was taking the CBO report “seriously.”
Other parts of the CBO report support raising the minimum wage, including the conclusion that a higher wage would boost the economy by raising consumption, Furman and Council of Economic Advisers member Betsey Stevenson wrote on the White House website.
CBO Director Doug Elmendorf declined to respond directly to White House criticism today at a Christian Science Monitor breakfast in Washington. He told reporters that his agency’s conclusions were “consistent with the latest thinking” of most economists.
Gene Sperling, director of the National Economic Council at the White House, said there was no loss of jobs when New Jersey raised its minimum wage, nor was there any effect on neighboring Pennsylvania. A study by economists involving 500 counties and neighboring counties showed similar results, Sperling said.
“All of them they found, raised wages and that did not hurt jobs,” Sperling said today on MSNBC’s “Morning Joe” program. Raising the minimum wage “improves morale, it improves productivity, improves retention.”
Senator John Thune of South Dakota, chairman of the Senate Republican Conference, said on the same program that the CBO report showed raising the minimum wage “could cost a million jobs.”
“Why would we be putting policies in place that have the potential to reduce the number of jobs?” Thune said.
The CBO report estimated that companies would shed about 500,000 jobs by late 2016. Higher-wage workers would give employers an incentive to hire less or upgrade technology, according to the report.
The effect on employment could be larger or smaller, it said, ranging from a “very slight reduction” to losses of about 1 million.
The boost for low-wage workers would total $31 billion, though just 19 percent of that total would go to families living below the poverty threshold, CBO said.
Still, their average family income would be increased by about 3 percent, and about 900,000 people would be moved out of poverty, among about 45 million people who would be below that threshold under current law, according to CBO.
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