Those who are uninterested in digesting the Congressional Budget Office’s 52-page analysis of a proposed $15-an-hour minimum wage might want to take the easy way out and head to your local fast food restaurant.
How did that self-order kiosk work out for you?
Democrats often use CBO studies to point out what they view as the folly of proposals coming from President Donald Trump and Republicans in Congress.
This time, the nonpartisan CBO hits the left were it hurts. A new analysis throws doubt on the economic benefits of the Raise the Wage Act of 2019, a proposal that seeks to increase the minimum wage to $15 an hour across the country. Ignoring the CBO’s warnings, the House last week passed the $15-an-hour bill, although the measure still needs Senate approval.
The CBO finds that an increase to $15 an hour would boost wages for 17 million workers and lift 1.3 million people out of poverty, which sounds nice enough until you read the fine print. Under this proposed law, at least 1.3 million workers would become jobless, with as many as 3.7 million people becoming unemployed under some scenarios in the CBO study.
“Their family wages would fall — in some cases, below the poverty threshold,” the CBO said in the report.
This analysis doesn’t necessarily squelch the value of a minimum wage increase. Indeed, it finds a far more modest downside with an increase closer to the $12-an-hour level already approved in Missouri, because a more gradual rise reflects the natural wage growth that occurs in an expanding economy.
But the CBO report raises red flags about an arbitrary wage hike for political purposes. In addition to price increases for consumers, the report predicts that the low-skill workers most in need of higher pay could get replaced by automation — self-serve checkout stands and kiosks — as businesses look to cut costs without resorting to price hikes.
“Some employers respond to a higher minimum wage by reducing their low-wage staff and shifting to those substitutes,” the CBO said.
Basically, machines become cheaper than people. We hope the automated kiosk remembers to hold the mayonnaise.
Then there’s the perverse side effects, noted in the study, of low-wage workers actually losing ground over the long run because an abrupt spike to $15 an hour reduces the incentive to gain the kind of additional training and education that leads to personal wage growth.
The economist Milton Freidman once said that “one of the great mistakes is to judge policies and programs by their own intentions rather than their results.”
The tragedy of the Raise the Wage Act, as illustrated in the CBO report, is that its application will hurt many of the people that it’s most meant to benefit.