Wednesday, February 19, 2014

What The CBO Actually Said

Headlines everywhere are telling us that a hike in the minimum wage from $7.25 to $10.10 would cause the economy to lose 500,000 jobs. We know this to be true because the non-partisan Congressional Budget Office said so in an official report, which they arrived at after careful and thorough study by highly expert economists and business experts. And they are, to repeat, non-partisan, meaning that they wouldn't fudge numbers to favor anyone.

Except that they didn't say anything even close to that. They said,

"In CBO’s assessment, there is about a two-thirds chance that the effect would be in the range between a very slight reduction in employment and a reduction in employment of one million workers."

They said there's a one-third chance that nothing would happen, and that if there were losses it migh be between essentially none or as high as one million, which I translate as a sort of "Our crystal ball is busted and we don't have a clue." I don't know why we're paying any attention to that at all. Pundits translated it as "We'll lose half a million jobs," which is halfway between their worst guess and best guess, and is a mean rather than an average. An average would be closer to 280,000 jobs lost.

So yes, we might lose 500,000 jobs or we might lose a million. But as I read the statement it seems the most likely event is that we'll lose very few or none which is born out by the empirical evidence of history, because every time that the minimum wage ahs been raised the prophesies of wage loss doom have proven to be entirely baseless. A few times jobs have even increased after a hike in the minimum wage.

1 comment:

Bartender Cabbie said...

I doubt we would lose very many if any. Prices may rise slightly on some items and that is likely about it.

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