According to a new report by the United States Congressional Budget Office, Barack Obama’s choice for raising the United States’ minimum wage could cost the country over 500,000 jobs by the end of June 2016.
The CBO, a governmental agency, believes that raising the federal minimum wage – a nationwide minimum hourly wage that determines the price floor for all states – is unlikely to result in a significant change to the gap between rich and poor people in the United States.
In the recent report, the CBO stated that as many as 16.5 million American workers would see their wages increase under the new regulations. This could lead to a large increase in consumer spending and an improvement of economic conditions.
But the office agency also warned that many Americans could lose their jobs due to unaffordability. Projections indicate that employers would “shed workers” as costs increased, or replace staff with technology.
In a recent press release, the CBO stated that: “The large majority would have higher wages and family income, but a much smaller group would be jobless and have much lower family income.”
The report on potential job losses is the second time this year that the CBO has dealt a blow to the White House’s plans. The agency previously calculated that the cost of the subsidies in the President’s health care reforms could create incentives for many US workers to leave their jobs instead of using employer-provided health care.
White House plans have hinted at an eventual federal minimum wage rise to $10.10 – a significant increase from the existing $7.25 minimum wage. The CBP suggested a smaller increase, to $9 per hour by June 2016, that would have a smaller impact on the economy.
Republicans have staunchly opposed increasing the minimum wage due to its cost on employment. Several Republicans claim that raising the minimum wage is not a smart policy during a period of slow economy growth and high unemployment.