CBO Says Minimum Wage Hike Would Help All But Very Top Income Brackets

Even though the CBO’s main job is to study the budgetary effects of legislation that is being considered and hasn’t already been studied, CBO came out with their thoughts on what sort of effect raising the minimum wage to $10.10 per hour would have on the American workforce. With a hit tip to Kevin Drum, check out this chart:


Obviously, the largest gains would come at the bottom end of the income scale, among families that make less than the Federal Poverty Line. Top earners, those that make more than six times the Federal Poverty Line, are the only group to see a net loss, though they would see a small increase in their take home wages. The decrease in their real-life purchasing power would likely come from increased cost of goods and services swamping income gains.

I think this speaks powerfully to a point that seems intuitive enough, but based on conversations I’ve had with some about raising the minimum wage, must not  be.

We all know the old rule of thumb, raising the minimum wage increases the cost of labor, and therefore decreases its supply, or kills jobs. The other article of faith that is just as intuitive, but for some reason has not gained traction, is that raising the minimum wage causes salaries to rise all over the pay scale. If the stereotypical burger-flipper at McDonald’s goes from making $7.25 per hour to $10.10, then his manager, who was making $10, will have to receive a raise to say, $13.00 per hour. Then, if the Manager at the local fast-food place is making more money than many of his customers, they will have to see a raise as well. Then, when the entry-level employees at “insert name of firm here” get a raise because the McDonald’s manager did, say to $20 an hour, all of a sudden their bosses are underpaid, and they need a raise.

Raising the minimum wage has ripples throughout the economy that will not only benefit “those people” who make minimum wage, but benefits almost everyone who earns their wage through salary instead of stock options. For this reason, basically anyone who works for a living ought to favor increasing the minimum wage, if they like money in their own pocket.


One comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s