Don’t Let the Congressional Budget Office Deceive You


Kirstin Bunkley/The Observer


Kirstin Bunkley/The Observer
Kirstin Bunkley/The Observer

Out of all the natural rights given to each man and woman, healthcare and a living wage make the top two. So when politicians and political groups try to take those away, it’s important for us to remember that these are rights we deserve—not privileges we’ve earned.

In February, the nonpartisan Congressional Budget Office (CBO) found that the Affordable Care Act (ACA), also known as Obamacare, will reduce the number of full-time jobs by 2.5 million by 2024. In another study, the CBO reported that raising the minimum wage to $10.10 an hour would increase unemployment by 0.3 percent, costing the economy 500,000 jobs. Not surprisingly, conservative politicians took advantage of the CBO’s findings. Louisiana Governor Bobby Jindal called Obamacare a “job-killer,” and House Speaker John Boehner said that he preferred suicide to a “clean” rise in the minimum wage, calling it “bad policy.”

Neither claim is true, however.

Obamacare is not a job-killer. According to the CBO, “the estimated reduction [of jobs] stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses’ demand for labor.”

The key word there is “choose.” Because the ACA puts an end to “job lock”—the unwillingness of an employee to voluntarily leave a job because doing so will result in the loss of healthcare—people can now safely leave their job without losing health insurance. Elderly people with serious health conditions who work just to get decent health coverage no longer have to worry about losing insurance if they retire. New mothers who return to work sooner than they would like to can now stay at home longer to raise their family without losing healthcare.

Because the ACA extends Medicare to people earning up to 138 percent of the poverty line, low-wage workers can now spend money on goods and services other than healthcare. This extra spending creates new jobs. Moreover, as more Americans obtain health insurance, there must be more healthcare workers to account for millions more patients, thus, raising the demand for labor in the healthcare field.

The CBO’s report on minimum wage does not match the consensus view of economists that raising the minimum wage has little to no negative impact on employment. Instead of performing its own empirical study on the employment effects of a minimum-wage hike, the CBO did a meta-analysis, looking only at existing studies and compiling the data.

Contrary to this highly flawed study, a minimum-wage increase actually helps the economy by creating jobs. Not only did the CBO report that an increase would lift 900,000 Americans out of poverty, it also found that increasing the minimum wage would boost wages for 25 million Americans, adding $31 billion to the paychecks of the working poor. Low-wage workers would have more money to spend, and their extra expenses would create jobs.  To quote Princeton economist and New York Times columnist Paul Krugman: “My spending is your income, and your spending is my income.”

Although employers of minimum wage workers would have to pay their employees more, the prices of their products would not rise significantly.  According to Robert Reich, former secretary of labor for President Bill Clinton, “such a wage increase is more likely to come out of profits than be passed on in higher prices because most employers of low-wage workers are in intense competition for customers.” With corporate profits at their highest in history, companies can absorb increased costs without reducing payroll or charging their customers exorbitant prices.

Raising the minimum wage is also a civil rights issue. Representing 42 percent of minimum wage earners, minorities—who, on average, earn less than white people—would be the majority of those lifted out of poverty.  Furthermore, because women make up two-thirds of minimum wage earners, an increase in minimum wage would help to close the gender wage gap. It would especially help women of color—who are overrepresented among female minimum-wage earners—because they, on average, earn even less than white women.

Both the ACA and the proposals to raise the minimum wage are economic polices designed to help the marginalized individuals of our society. Of course, actions aimed at improving the lives of millions of Americans have trade-offs. But when the positive effects of those policies outweigh any nominally negative consequences, we must pursue them with deliberate speed. Every single human being has a right to healthcare and a living wage. No one working full-time should be in poverty. We take a giant step closer to a just society by implementing these policies.