Incremental Raises to Minimum Wage Will Not Increase Unemployment

Incremental Raises to Minimum Wage Will Not Increase Unemployment

Robert Pollin: A Recent Congressional Budget Office report claims that up to half a million jobs could be lost due to a minimum wage increase, but its claims are based on weak analysis and ignores the potential gains for workers' standard of living -   February 26, 2014
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Robert Pollin is professor of economics at the University of Massachusetts Amherst. He is the founding co-director of the Political Economy Research Institute (PERI). His research centers on macroeconomics, conditions for low-wage workers in the US and globally, the analysis of financial markets, and the economics of building a clean-energy economy in the US. His latest book is Back to Full Employment. Other books include A Measure of Fairness: The Economics of Living Wages and Minimum Wages in the United States and Contours of Descent: US Economic Fractures and the Landscape of Global Austerity.


Incremental Raises to Minimum Wage Will Not Increase UnemploymentJESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I'm Jessica Desvarieux in Baltimore.

The Congressional Budget Office recently released a report examining the wage and employment effects of raising the minimum wage. The report examined two possibilities, the first being the one that Democrats are proposing, which would be a $10.10 minimum wage, and also a $9 minimum wage, both by the year 2016.

Now joining us to discuss all this is Bob Pollin. He's an economics professor at the University of Massachusetts Amherst. And he's also a regular contributor to The Real News.

Thanks for joining us, Bob.


DESVARIEUX: So, Bob, I actually recently did a story all about this CBO report and the two proposals that they brought up. I mentioned the first one, the $10 minimum wage hike, and then the $9 minimum wage hike. They're saying that half a million jobs could potentially be lost--or at least this is what the headlines are saying--or potentially 100,000 jobs could potentially be lost if we raise it to $9. What are your main criticisms of the CBO report?

POLLIN: Well, the CBO report does not reflect where the majority of economic research has been over the last 20 years on this, including people like Alan Krueger of Princeton, who was the head of the Council of Economic Advisers up to some months ago. So this is very mainstream finding that we do not consistently see evidence of employment going down when you raise the minimum wage. I mean, of course, if you raise it to $40 an hour, yes, you'll see employment going down. But if you raise it incrementally, if we're talking about a $10 increase, which is quite modest (we can talk about that in a minute), the majority, overwhelming majority of evidence finds no negative employment effects.

DESVARIEUX: What did the report actually say? What would be the worst-case scenario?

POLLIN: Yeah. So the headlines coming out of that report did not consistently reflect what actually was in the report. So they say, we're going to--you know, their best guess--and it of course is a guess--is that we lose 600,000 jobs. Now, 600,000 jobs, of course, that's 600,000 fewer people that have jobs, and that's about one-third of 1 percent of our labor force, which is 155 million people.

At the same time, they're finding that 26 million people are going to get raises. So if we want to say something like their worst-case scenario--I don't think that the evidence shows that 600,000 jobs will be lost, but we're still finding that the one thing we know happens is that people are going to get raises. We don't know what actually happens with employment, but we know for sure that people are going to get raises. That's 26 million people that get raises. And even according to the Congressional Budget Office Report, they show that the benefits, in terms of income gains, go all the way up to families at roughly about $120,000 to $150,000 a year. That is, what they say are families all the way up to six times the poverty line are all going to see a higher standard of living as a result of a minimum wage increase to $10.10 per hour.

DESVARIEUX: Bob, what I find interesting in the report is that they actually released that companion report that would look at the effects of a $9 minimum wage, and some people, I'm already hearing on the Hill, are saying that this would be the compromise. What do you make of that argument, and why does it come up short in your opinion?

POLLIN: Well, let's give a little historic background here. The minimum wage in the United States after we correct for inflation, so in today's dollars, the minimum wage in the United States was $10.70 in 1968, okay? So in 1968, that means, you know, a young girl, for example, going to work or a 16-year-old in McDonald's made $10.71 an hour. So even if we get to $10.10 by 2016, we're below where we were more than 40 years ago. So the notion that we can only get to $9 is really grossly inadequate.

A little more historic perspective: the average labor productivity, the average amount a worker produces over the course of the day, is now 150 percent higher than it was in 1968. So if the minimum wage only went up step by step with inflation and average productivity, the minimum wage in the country today would be $26 an hour.

So to say that a $9 minimum wage is a compromise is completely out of step with where we have been. We need to get workers back. You know, it's--the Obama administration itself has accepted that inequality is, you know, a massive problem in our time and only getting worse. And so a minimum wage is a powerful tool for adjusting and giving benefits, income gains, to people all the way up to a family income, a high--middle-class income, $120,000 a year.

DESVARIEUX: Those are some strong arguments that you made. And I'm glad that you mentioned President Obama, because I want to get your take: why doesn't the president come out and advocate for, say, a higher wage than beyond this $10, like, a living wage, some would say maybe even $15? 'Cause like I stated before, I just finished up this piece where I spoke with a woman. She could barely pay her bills and she was living below the poverty line. And when we raised her--when she saw that increase in her--wages go up to $10 an hour, she was right above the federal poverty line. And that's not even--some people say, obviously, that's way too low to begin with. So what's your take on that? Why doesn't President Obama come out and say that we actually should be fighting for a living wage?

POLLIN: Well, he did say the word "living wage" in his State of the Union speech, so that was good. But, of course, what do we define as a living wage? Ten dollars and ten cents an hour is not a living wage. Ten dollars an hour, if you're working full-time over the year, you're making $20,000 a year. That is barely above the poverty line for two people in this country.

I mean, the Economic Policy Institute has a better measure, what they call basic family budget line. And the basic family budget line, which looks at actually how much things cost, for--in my area, Springfield, Massachusetts, is about $55,000 a year, according to their line, for, say, a single mother and a child. So $20,000 a year isn't even close to getting to a decent living standard. Fifty thousand dollars a year is in the range that we're talking about.

Now, why Obama doesn't do it, of course, I can't speak for Obama. The point is that in any case, it's so far beyond where the mainstream discussion is in Washington, it'll be hard for Obama himself to come out for it.

But, luckily, there are movements. Of course, it all started with the very courageous actions by fast food workers last summer, arguing and going on strike, one-day strikes, for a $15 minimum wage. And when they did that, people thought, oh, these people are out of their minds, this is so far beyond reality.

But now, you know, in the city of Seattle, they elected a socialist city councilmember who--her platform was $15 minimum wage. And it's going to pass in Seattle, and other cities as well, just building a momentum for that. And that's the direction.

You know, presidents don't lead; presidents follow movements. So it's really up to the social movement to fight for this decent living standard.

DESVARIEUX: Alright. Bob Pollin, regular contributor to The Real News and codirector of PERI, thank you so much for joining us.

POLLIN: Thanks very much for having me, Jessica.

DESVARIEUX: And thank you for joining us on The Real News Network.


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