IFO, CBO Minimum Wage Perspective

I appreciate the work that Pennsylvania’s Independent Fiscal Office has done on many subjects. The IFO has been a reliable source of perspective in an increasingly less reliable political environment.

But I also want to caution those who might now use the IFO’s study of how a $10.10 minimum wage might impact Pennsylvania’s entry-level workers as “the reason” a $10.10 would not work.

Because the IFO used the same methodology as the Congressional Budget Office when it studied a $10.10 minimum wage back in February 2014, the same understanding must apply to the IFO’s recent report.

As I articulated in my June 2014 response to the PA Chamber of Business’s hackneyed criticism of proposals to hike the base hourly rate to $10.10 – where I want PA to go in my Senate Bill 195 – there’s good reason to not be so pessimistic:

"The Congressional Budget Office, which the chamber mentions in paragraph two of its letter, says in its February report that there is, indeed, ‘a two-thirds chance’ that 500,000 workers – across the country – could lose their positions. The other half of that sentence, though, is its ‘central estimate’ of an increase to $10.10 ‘would be in the range between a very slight decrease in employment and a decrease of 1 million workers.'

"If those 500,000 workers are affected, the 16.5 million remaining minimum wage earners ‘would end up with higher earnings during an average week,' the same CBO report explains.

"Should this happen, the CBO said a minimum wage increase would lower ‘the additional cost of hiring a new employee, leading to increased employment.'

"‘Because those low-wage workers tend to spend a larger fraction of their earnings, some firms see increased demand for their goods and services, boosting the employment of low-wage workers and higher-wage workers alike. That effect is larger when the economy is weaker, and it is larger in regions of the country where the economy is weaker,' the CBO study found.

"That economic bounce could very well happen in Pennsylvania because our state’s economy has not rebounded like others across the United States," I wrote.

My friends who are minimum wage antagonizers should also remember that the new IFO study, like the CBO’s research, found a lot to like about a $10.10 minimum wage. As Capitolwire.com noted:

"The report does indicate there would be about 1 million directly-affected workers (those currently earning $10.10 or less who retain their jobs), and the increase could produce added annual post-tax income (assuming all taxes, including the state income tax, are applied) of between $1,600 and $1,900, depending on whether the individual is a part-time or full-time employee (a nearly 50-50 split)."

If you need a reminder on where PA lawmakers are currently positioned on increasing the minimum wage, you may allow the Philadelphia Tribune to refresh your memory – or just know that we are fighting to get my bill out of committee.

Labor Corner

No commentary here, just some labor-related news items from the week that I want to share:

2-Year College Is Accused of Exploiting State Labor Law to Trample Faculty Rights

Labor, tech unite behind push for ‘on demand’ worker rights

Why Obama says TPP is historic for workers — and why US labor unions hate it

Former Labor Secretary Robert Reich: ‘As income and wealth go to the top, so does power’

13 women who transformed the world of economics