Sophie’s Raise

The Congressional Budget Office has released one of those rare financial reports that has both sides crowing and declaring victory.

Who you believe – or weight the highest – likely depends on your economic literacy, politics, and what you do for a living.

The headline on NPR  – “CBO: Minimum Wage Hike Could Boost Paychecks – And Cut Jobs” – left wiggle room both ways:


Whatever you already believed about raising the federal minimum wage, you now have more ammo for your argument, thanks to a report released Tuesday by the Congressional Budget Office, titled “The Effects of a Minimum-Wage Increase on Employment and Family Income.”

Yes, you’re right: Raising the wage in steps to $10.10 an hour by 2016 would push employers to cut jobs — about 500,000 of them, says the CBO, the nonpartisan research arm of Congress.

On the one hand, according to one reading of the report, a hike to 10.10/hour – about 40% – would “lift nearly 1 million” out of poverty, and put money into “wallets of workers who are eager to spend”, and give a “raise” to 16.5 million people.

But then there’s those 500,000 jobs lost.

By the way, that’s about the softest estimate you can imagine; the CBO report itself says “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” – meaning about a 30% chance that over a million jobs would be lost.

I’d bet those odds.

Oh, yeah – and “the poor” aren’t necessarily working for minimum wage, and it’s not “the poor” who’ll be getting most of the benefits:

Just 19 percent of the $31 billion would accrue to families

with earnings below the poverty threshold, whereas 29 percent would accrue to families earning more than three times the poverty threshold, CBO estimates.

That’s three dollars going to the middle class – mostly teenagers and other children of moderately well-off families – for every two going to “the poor” (that actually get to keep their jobs).

So like the protagonist in “Sophies Choice”, what do you do?  Make life marginally easier for “the poor”, at the expense of creating many more of them?