CBC:The Effects of a Minimum-Wage Increase on Employment and Family Income

CONGRESSIONAL BUDGET OFFICE:

What Options for Increasing the Minimum Wage Did CBO Examine?

For this report, CBO examined the effects on employment and family income of two options for increasing the federal minimum wage (see the figure below):

What Effects Would Those Options Have?

The $10.10 option would have substantially larger effects on employment and income than the $9.00 option would—because more workers would see their wages rise; the change in their wages would be greater; and, CBO expects, employment would be more responsive to a minimum-wage increase that was larger and was subsequently adjusted for inflation. The net effect of either option on the federal budget would probably be small…

Effects of the $10.10 Option on Employment and Income

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…

Effects of the $9.00 Option on Employment and Income

The $9.00 option would reduce employment by about 100,000 workers, or by less than 0.1 percent, CBO projects. There is about a two-thirds chance that the effect would be in the range between a very slight increase in employment and a reduction in employment of 200,000 workers, in CBO’s assessment. Roughly 7.6 million workers who will earn up to $9.00 per hour under current law would have higher earnings during an average week in the second half of 2016 if this option was implemented, CBO estimates, and some people earning more than $9.00 would have higher earnings as well…

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