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?

9 thoughts on “Sophie’s Raise

  1. I can’t stand NPR. The report I heard last night downplayed the job loss angle. Shouldn’t an outfit like NPR, beholden not to advertisers but the TRUTH, mention that it will likely be the least employable workers who will lose a job, or never get one?
    “The proposed raise would lift nearly 1 million Americans out of poverty and put billions into the wallets of workers who are eager to spend”
    And just where does NPR think these billions of dollars will come from? Corporate profits? It’s going to come from the pockets of OTHER PEOPLE.

  2. NRPs advertistors are the wealthy white liberals who fund them. NPR needs to tell those people what they want to hear.

  3. Since we all know Republicans will cave on this issue eventually, how about this as a compromise proposal: the new minimum wage is paid only to people who are not students and who cannot be claimed as Dependent on another’s taxes.

    Focus the benefit on working poor heads of household. They actually need it. Then we can be heart-ful too, without causing as much damage to the economy.


  4. Joe Doakes, that would give students and dependents an advantage over working heads of households in the low-skill job market.

  5. Make life marginally easier for “the poor”, at the expense of creating many more of them who would vote liberat in perpetuity?

    There, fixed it for you. Not Sophie’s choice after all, but a calculated downgrade and continuing disassembling of Amerika. WAKE THE FUCK UP!

  6. OK, speaking as a statistician, the apparent fact that the CBO calculated an upper bound at p= 0.7 is astonishing, and quite frankly, unforgiveable from an ethics point of view. It’s a little better than flipping a coin, and given the inherent unreliability of econometrics–all those reports “unexpectedly” out of the predicted range–probably is as bad as IPCC reports in terms of credibility.

    More or less, they’re trying to hide the actual likely range of this with honest (95%) statistical confidence, which would predict most likely about half a million more jobless at the high end. I smell “team Obama” in this.

    By the way, when I do a back of the envelope calculation, I’m getting towards the upper bound of this. As anyone who has read Rothbard’s “America’s Great Depression” knows, you cannot legislate prosperity.

    And with others, I also find it infuriating that journalists–including but not limited to MPR/NPR–aren’t pointing out that if your work isn’t worth your pay, you will find yourself unemployed.

  7. There are a lot of servers out there that are going to be disappointed when their tips fall off commensurate with their “raise”. I have friends that have never tipped more than 10%, justifying it by stating that the servers get it back from higher menu prices.

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