Pick Your Community: | Hopkins | Muhlenberg | Daviess | Christian | Henderson | Lakes | McCracken | Webster

Nonpartisan Analysis by Congressional Budget Office Weighs in on 39 Percent Increase in Minimum Wage

money dollars coinsWASHINGTON D.C. (2/19/14) — Proposals in Washington D.C. and Frankfort are being pushed through Congress and the General Assembly to increase the minimum wage to $10.10/hour from the current $7.25.

The CBO analysis looks at the pros and cons of a 39 percent increase in the minimum wage an employer can pay an employee in the United States.

On the federal level, there is a $9 per hour option (reached in two years with an automatic adjustment for inflation).

The CBO includes a revealing graph of Minimum Wage rates over the years adjusted for inflation.

The argument for increasing Minimum Wage points to the fact:

  • Inflation has eroded the purchasing power of $7.25 per hour.
  • There are few that would argue that $7.25 per hour is a “living wage”.
  • A person earning $7.25 per hour and 40 hours per week earns $15,080 per year.
  • This is above the 2013 federal poverty level for a single person household ($11,490); but, it falls below poverty for a two person household ($15,510).

The CBO estimates that, with an increase to $9 per hour (24 percent increase), approximately 7.6 million workers would benefit.

A person earning $7.25 per hour and 40 hours per week earns $15,080 per year.

An increase to $10.10 (39 percent increase) would capture even more - 16.5 million workers would benefit.

“As a group, workers with increased earnings would pay more in taxes and receive less in federal benefits of certain types than they would have otherwise,” the report says.

The CBO report is not all roses about an increase.

“Once fully implemented in the second half of 2016, the $10.10 option would reduce total employment by about 500,000 workers, or 0.3 percent,” CBO projects. “The $9 option would reduce employment by about 100,000 workers, or by less than 0.1 percent.”

A higher Minimum Wage increases an Employer’s costs for wages paid; and for, employer matching taxes, unemployment taxes and workers compensation insurance premiums based on wages paid.

Many minimum wage employees are found in retail, food service and hospitality.

Employers in these areas have little choice but to pass the increased costs on in the form of higher prices.

Even with higher prices and higher taxes, the Minimum Wage employee will be dollars ahead; unless, that employee loses his or her job. When prices increase, there is less sold. People on fixed incomes will definitely be losers as they face higher food and service costs. People have only so much they can spend (disposable income). With higher prices, they will buy fewer goods and services; thus, reducing the need for laborers to provide those goods and services. Note: this does not just apply to Minimum Wage employees.

Increases in Minimum Wage rates increase virtually all hourly wages.

Employers and employees often gauge pay rate vs. Minimum. i.e. a person currently making $10 per hour which is $2.55 above Minimum would push to remain $2.55 above minimum or $12.65 per hour.

The employer would also want to keep the employee and would try to pay more. As a result, the employer must offset the increased costs with all hourly employees.

The employer’s choices are to increase prices, increase productivity (make more or do more with fewer people) or adjust other employee benefits to contain costs. Automation and outsourcing also remain options for many employers.

The CBO report clearly favors the $9 Minimum Wage over the $10.10 Minimum Wage. The report indicates a slight decline in employment at $9.

SurfKY News does not have independent projections of the impact on Kentucky employment with raising Minimum Wage to $10.10.

There is no reason to believe that Kentucky would be different.

Most agree that either a 24 percent or 39 percent increase in Minimum Wage will have a significant impact on our economy.

Also, most agree that the increase is driven much more about politics than concern for the worker.

Read the full Congressional Budget office report online.

Ron Sanders
SurfKY News

© Copyright 2014 SurfKY News Group, Inc. All rights reserved. This material may not be published, broadcast, or rewritten without permission. SurfKY News encourages you to share this story by using one of the social media links below.

In Other News...

Uncle Lee's in Greenville is Closing Its Doors Forever

GREENVILLE, Ky. (10/20/14) — After nearly 40 years in business, Uncle Lee's on Main Street in Greenville is closing its… Read More

Muhlenberg Marching Band Sweeps Hopkinsville Competition

HOPKINSVILLE, Ky. (10/20/14) — The Muhlenberg County High School Band ended its regular season on a high note Saturday,… Read More

Most Read This Week

October 17, 2014 11425

UK Women's Soccer Welcomes Ole Miss, No. 5/4…

in General Sports For All Sites by UK Athletics
October 14, 2014 3690

Man Tries to Beat Train, Two Life-Lined to…

in Local (Hopkins) Top News by Hopkins County Sheriff’s Office
October 15, 2014 3488

Family Business, Graphics Pros to Open Friday

in Top News For All Sites by Shawn Freels
October 15, 2014 3348

Chamber Meeting and More Announced

in Local (Muhlenberg) Top News by Dorothy Walker
October 14, 2014 3340

Madisonville Police Arrest Reports - Oct. 14, 2014

in Hopkins News by Madisonville Police Department
October 17, 2014 3234

Single Vehicle Collision Results in One Injury

in Local (Muhlenberg) Top News by Trooper S. C. Recke
October 15, 2014 3136

Madisonville Police Arrest Reports - Oct. 15, 2014

in Hopkins News by Madisonville Police Department
October 14, 2014 3064

Hopkins County Traffic Advisory

in Hopkins News by Keith Todd
October 20, 2014 2961

Uncle Lee's in Greenville is Closing Its Doors…

in Local (Muhlenberg) Top News by www.unclelees.com
October 19, 2014 2896

Kentucky Energy Department Releases Virtual Solar…

in General News For All Sites by Dick Brown

Stories Trending Today

October 20, 2014 2961

Uncle Lee's in Greenville is Closing Its Doors…

in Local (Muhlenberg) Top News by www.unclelees.com
October 19, 2014 2896

Kentucky Energy Department Releases Virtual Solar…

in General News For All Sites by Dick Brown
October 20, 2014 1894

Man Charged for Assaulting Pregnant Wife

in Local (Hopkins) Top News by Madisonville Police Department
October 19, 2014 1573

Right-to-Work: The Right Message for Kentucky’s…

in General News For All Sites by Jim Waters
October 19, 2014 1347

Avoid Halloween Makeup Allergies and Other…

in General News For All Sites by SurfKY News
October 20, 2014 1258

Man Arrested for Shoplifting, Assaulting Police…

in Local (Hopkins) Top News by Madisonville Police Department
October 19, 2014 1250

Key to Cooking with Pumpkins

in General News For All Sites by SurfKY News
October 19, 2014 1158

The Legend of Jack-o'-Lanterns

in General News For All Sites by SurfKY News
October 20, 2014 975

KU and LG&E to Fund Qualified Tree-Planting…

in General News For All Sites by Cliff Feltham
October 19, 2014 953

Outdoor Truths - Oct. 19, 2014

in General News For All Sites by Gary Miller

SurfKY News Group, Inc.
1125 Nebo Rd.  •  Madisonville, KY 42431
270.452.2727 (phone)
  •  270.452.2249 (fax)


Contact a member of our staff: www.surfky.com/contact
Copyright © 2014 SurfKY News Group, Inc.  •  Terms of Use  •  Site Map

social fbsocial twsocial yt
social gpsocial flrsocial rss