American Elephants

Democrats don’t seem to have a high opinion of ordinary American citizens. They usually want to buy their votes, with some promised legislation. Their big, big idea has been raising the minimum wage to $15 an hour. Trouble is some people simply aren’t worth the raise. There has to be a spot in our economy for people just starting out, who don’t yet know how to be useful workers. Some businesses are too small to pay that much, and must either do the work themselves or give up the business.

The Congressional Budget Office has estimated (their median estimate) that under the $15 an hour option, 1.3 million workers who would otherwise be employed would be jobless in an average week in 2015. (That would equal an 0,8 percent reduction in the number of employed workers).

Zero Hedge has the full CBO report, with graphs and a thorough explanation of the effects.

The $15 option would affect family income in a variety of ways. In CBO’s estimation, it would:

• Boost workers’ earnings through higher wages, though some of those higher earnings would be offset by higher rates of joblessness;
• Reduce business income and raise prices as higher labor costs were absorbed by business owners and then passed on to consumers; and
• Reduce the nation’s output slightly through the reduction in employment and a corresponding decline in the nation’s stock of capital (such as buildings, machines, and technologies).

On the basis of those effects and CBO’s estimate of the median effect on employment, the $15 option would reduce total real (inflation-adjusted) family income in 2025 by $9 billion, or 0.1 percent.