The Congressional Budget Office on February 18, 2014, issued a report titled “The Effects of a Minimum-Wage Increase on the Employment and Family-Income.  “In summary the report says, “Increasing the minimum wage would have two principal effects on low-wage workers. Most of them would receive higher pay that would increase their family’s income, and some of those families would see their income rise above the federal poverty threshold. But some jobs for low-wage workers would probably be eliminated, the income of most workers who became jobless would fall substantially, and the share of low-wage workers who were employed would probably fall slightly.”

The report goes on to illustrate that approximately 1 million low income worker jobs would be eliminated while approximately 1 million workers would be raised out of the poverty.

“Many more low-wage workers would see an increase in their earnings. Of those workers who will earn up to $10.10 under current law, most—about 16.5 million, according to CBO’s estimates—would have higher earnings during an average week in the second half of 2016 if the $10.10 option was implemented. Some of the people earning slightly more than $10.10 would also have higher earnings under that option, for reasons discussed below. Further, a few higher-wage workers would owe their jobs and increased earnings to the heightened demand for goods and services that would result from the minimum-wage increase.”

More interestingly, the report says that after all income increases and decreases have taken affect in 1915-16, total increase in overall income of the poverty level earners would only increase by $2 billion.

“Moreover, the increased earnings for some workers would be accompanied by reductions in real (inflation-adjusted) income for the people who became jobless because of the minimum-wage increase, for business owners, and for consumers facing higher prices. CBO examined family income overall and for various income groups, reaching the following conclusions:  “Once the increase and decreases in income for all workers are taken into account, overall real income would rise by $2 billion.”

Read the CBO report for yourself using the link on the right side of our main page.   While it skirts the issue of the effect of a minimum wage increase on inflation it doesn’t confirm it.

The Redneck Economist