Weekly Political Report: The Minimum Wage Hike Paradox

Every week I write a political issue that affects YOU and the World AROUND YOU.

This week’s Weekly Political Report: The Minimum Wage Hike Paradox


After two weeks of implementing the minimum wage hike into law, a law which requires federal contractors to pay their employees $10.10 per hour instead of $7.25, a recent report came out, from the Congressional Budget Office (a non-partisan government agency), saying that the executive order, signed by President Obama to lift 900,000 Americans out of poverty, might actually kill 500,000 jobs simultaneously by 2016–the probability of this happening are two-thirds.

So how can a legislation that lifts 900,000 people out of poverty somehow kills 500,000 jobs in the process? CBO explains,

“…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”

…After reaching $10.10 in 2016, the minimum wage would be adjusted annually for inflation as measured by the consumer price index.”

So I guess the best explanation for this paradox is inflation–and how the consumer price index will measure that in the years to come.

*[Consumer Price Index, by definition, is an index of the variation in prices paid by typical consumers for retail goods and other items; and Inflation, by definition, is a general increase in prices and fall in the purchasing value of money.]

However, despite these facts,  Republicans and Democrats alike did not waste any time to use these findings to strengthen their bully pulpits.

“The non-partisan Congressional Budget Office confirmed yet again what we know to be true of government overreach in the marketplace: raising the minimum wage would slash jobs and harm an already fragile workforce”

–Sen. John Cornyn, the chamber’s second-ranking Republican.

Furthermore, Republicans are saying that this increase would make it more expensive for businesses to hire; some have called for “expanding the earned income tax credit” to counterbalance the wages of the working poor.

On the other hand Democrats, such as House Democratic Leader Nancy Pelosi, disagree with this logic; and stands firm behind the CBO’s findings of lifting 900,000 Americans out of poverty:

“No matter how the critics spin this report, the CBO made it absolutely clear: raising the minimum wage would lift almost one million Americans out of poverty, increase the pay of low-income workers by $31 billion and help build an economy that works for everyone.” –Nancy Pelosi, House Democratic Leader

President Obama has not yet to comment on this report, however, his administration did comment on how the CBO’s findings were exaggerated in terms of likely job losses; and supported their comments with verified conclusions from economists:

“CBO’s estimates of the impact of raising the minimum wage on employment does not reflect the current consensus view of economists. The bulk of academic studies have concluded that the effects on unemployment of minimum wage increases in the range now under consideration are likely to be small to nonexistent.” –Jason Furman, head of the Council of Economic Advisors.

So how does this affect YOU and the WORLD AROUND YOU?

Well, for one thing twenty-one states along with the District of Columbia have already increased their minimum wages above the federal level; and California are scheduling to lift its minimum wage to $10 by 2016. So, it’s not likely that the 21 states nor America would repeal this minimum wage hike.

Also, this report reminds us, and the world, that income inequality does exist. CBO even stated that 900,000 Americans live in poverty. That’s like the U.S. population size of Montana! Or the population size of the Fiji islands!

In my opinion, this minimum wage hike will help 900,000 Americans who are in poverty. Republicans say that it will hurt businesses from this tax hike; however, businesses that do not raise their minimum wage, or do not have higher minimum wages to begin with, will end up hurting their business overall. Higher Wages = Higher Morale = Higher Productivity. Business need to encourage their employee’s morale even if it means higher wages; that’s how businesses thrive–take Costco or Starbucks.

Their alternate plan “to expand the earned income tax credit” may sound doable, but it does not speak the common language that 90% of Americans speak:

Higher Wages = Better Living.


Below are some facts that I pulled from www.cbo.gov. Please read and be informed.

If you wish to learn interesting facts about population sizes by state and country, follow these links: Population Size by State and Population Size by Country

And if you wish to learn more of the political story behind the Minimum Wage Hike go to Politico: “CBO: Minimum wage hike would boost earnings for over 16.5M, cost 500k jobs”

The Facts from the Minimum Wage Hike

  • The increased earnings for low-wage workers resulting from the higher minimum wage would total $31 billion, by CBO’s estimate. However, those earnings would not go only to low-income families, because many low-wage workers are not members of low-income families. 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.
  • Real income would increase, on net, by $5 billion for families whose income will be below the poverty threshold under current law, boosting their average family income by about 3 percent and moving about 900,000 people, on net, above the poverty threshold (out of the roughly 45 million people who are projected to be below that threshold under current law).
  • Once the increases and decreases in income for all workers are taken into account, overall real income would rise by $2 billion.
  • Families whose income would have been between one and three times the poverty threshold would receive, on net, $12 billion in additional real income. About $2 billion, on net, would go to families whose income would have been between three and six times the poverty threshold.
  • Real income would decrease, on net, by $17 billion for families whose income would otherwise have been six times the poverty threshold or more, lowering their average family income by 0.4 percent.

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