Corporate interests invented cost-benefit analysis as a way to delay progressive policy through studies and weigh it down by equalizing, for example, the burden on business with the benefits for citizens. But now we’re seeing a new genre: cost-cost analysis. When the benefits become too obvious, they get erased, and only the costs are factored in.
That’s what we’re seeing after the Congressional Budget Office released its assessment Monday of the effects on employment and income from increasing the minimum wage to $15 an hour by 2025. This analysis precedes an expected vote on a $15 minimum wage in the House before the August recess. Though conservative Democrats had been resisting such a broad nationwide shift from the current $7.25 an hour minimum, progressives rounded up enough votes to ensure its passage.
The GOP Senate won’t be passing such a drastic change, and Donald Trump won’t be signing it. But the fight for $15 has triggered this analysis, and it suggests that raising the wage would be very good news for American workers.
The greatest effects would be felt by those living below the poverty line, who would see a 5.3 percent increase in earnings. Wages would increase for as many as 27.3 million workers, roughly one in six Americans. That includes “many of the 10 million workers whose wages would be slightly above the new federal minimum,” according to the CBO; as the minimum wage kicks everyone up to $15 an hour, those slightly above that level would likely bargain for and get a raise as well. Workers would see total wages increase by $44 billion in the aggregate, with virtually all of that going to the poor. And 1.3 million Americans would rise out of poverty.
Now for the costs in the cost-benefit analysis. According to the study, 1.3 million Americans would lose their jobs. Half of these would be teenagers, and a large segment of the 700,000 adults losing jobs would be part-timers. Consumers would pay around 0.3 percent more for their goods and services, as the wage increase gets partially passed on, and business owners would lose $14 billion, a trivial amount of total business income.
This is what you might call a wealth transfer: well-off people would pay a little bit more for goods, and businesses would lose a little bit more in profits, to finance a wage increase for a substantial segment of the population. Inequality would be reduced by a significant factor. The cost-benefit analysis clearly comes out on the side of benefits.
Plus, as the Economic Policy Institute explains, with substantial turnover in the low-wage job market, most of those 1.3 million would cycle through to find other jobs, which by definition would pay more than they would without a higher minimum wage. If someone making $7.25 an hour, the current minimum, can only find a job half as much of the time at $15 an hour, they still come out ahead.
I should also note that the CBO’s analysis is harsher than other studies about increasing the minimum wage. Since many cities and states have raised wages lately, we have decent evidence about what an increase similar to a $15 federal minimum wage would look like. You can now compare areas where wages increased to areas where they didn’t, and examine the results. A paper just released by two UC Berkeley economists looked at this existing evidence, finding no “adverse effects on employment, weekly hours or annual weeks worked,” and no meaningful employment loss among any subgroup segmented by race or gender. The main impact was a decline in household and child poverty.
However, even with its pessimism, the CBO paints a pretty solid picture of increased wages for twenty-seven million low-wage Americans. These broad benefits outweigh the costs.
But you’ll never guess how this is being discussed by conservative business interests. “CBO Warns Federal $15 Minimum Wage Will Cost Up to 3.7 Million Jobs Nationwide,” blares the headline of the “Job Creators Network,” a front group assembled by the co-founder of Home Depot, Bernie Marcus, with a board that includes disgraced former Labor Secretary nominee Andy Puzder and disgraced former Federal Reserve nominee Steven Moore. (The 3.7 million number is the highest end of a range of potential outcomes that the CBO estimated, not the exact number; 1.3 million was the midpoint.)
You will not see one scrap of the positive results that the CBO found in the writeup, just a “cost-cost analysis.” The assumption made is that any negative circumstance on business, regardless of the benefits from the same policy, must be salvaged. Though 21 people will get a wage boost for everyone that would allegedly lose a job under the CBO’s analysis, the only impacts mentioned are the latter. And of course, this neglects the growing body of research finding little to no job effects.
What you’re left with is business owners blaming the minimum wage for any possible job impact, including personal mismanagement. One example is playing out now in Seattle, where this week Restaurants Unlimited, an upscale restaurant chain, filed for bankruptcy. The company blamed “progressive wage laws along the Pacific coast that have increased the minimum wage,” according to its chief restructuring officer, David Bagley. Seattle, of course, is one of those cities, with a minimum wage currently at $12 an hour for small employers, and up to $16 for the largest employers. This includes restaurant servers.
Left unmentioned is the fact that Restaurants Unlimited is a portfolio company of private equity firm Sun Capital, which has weighed it down with substantial debt. While Bagley noted $10.6 million in wage increases, he didn’t point out the company’s $40 million debt load, which makes it unable to reinvest in the businesses or respond to changing tastes. Revenue at the chains, which does not take into account wages, was down last year.
This is the longest time period with no increase in the federal minimum wage, and many low-wage business owners would like to keep it that way. But the CBO’s analysis and the even brighter parallel studies show that the public would see significant benefits from an increase. The business owners only want you to see the costs.