Washington Alert-Part II (02/20/2014)

…Increasing the federal minimum wage would be like a two-edged sword for the fortunes of low-wage workers, according to a report by the Congressional Budget Office (CBO) that was released on Feb. 18. (Pub. No. 4856 – The Effects of a Minimum-Wage Increase on Employment and Family Income) On the one hand, most low-wage workers “would receive higher pay that would increase their family’s income,” CBO said. However, “some jobs for low-wage workers would probably be eliminated, the income of most workers who became jobless would fall substantially, and the share of low-wage workers who were employed would probably fall slightly,” it added. CBO examined two possible options – the “$10.10” option that would increase the minimum wage from the current $7.25 per hour to $10.10 per hour in three steps, and the “$9.00” option that would increase the minimum wage to $9.00 per hour in two steps. In both cases, the target minimum wage would be reached in 2016. CBO noted that an increase in the minimum wage would have an indirect effect on the federal budget by changing people’s income. “As a group, the workers receiving an earnings increase would pay more in taxes and receive less in benefits than they would have otherwise, reducing the federal budget deficit; however, the workers, business owners and consumers with reduced income would pay less in taxes and receive more in benefits, increasing the deficit,” CBO said. The report includes a discussion of the interaction between the minimum wage and the earned income tax credit. To view, click here.