Minimum Wage Hike Could Lift 900,000 Out Of Poverty But Also Cost Jobs: CBO Report

02/18/2014 03:13 pm ET | Updated Feb 19, 2014

WASHINGTON -- The Congressional Budget Office released a report Tuesday concluding that the Democrats' proposal to raise the minimum wage would reduce poverty but also cost the economy jobs, providing fodder to both sides of the aisle.

By hiking the minimum wage from its current level of $7.25 to more than $10, and pegging the minimum pay to inflation, the proposal would raise the country's collective wages by $31 billion and lift perhaps 900,000 people out of poverty, according to the CBO study. But the authors found that the measure would also likely eliminate an unknown number of jobs, ranging from a "very slight decrease" in employment to up to 1 million positions.

"In general, increases in the minimum wage probably reduce employment for some low-wage workers," the authors wrote. "At the same time, however, they increase family income for many more low-wage workers."

The report from the non-partisan office isn't likely to alter an age-old debate surrounding minimum wage raises, but it will provide both Democrats and Republicans with fresh data and talking points on what President Barack Obama has deemed a priority for 2014.

White House spokesman Jay Carney quickly pushed back against the report's finding that job loss could be significant under the proposal.

"I would point them to the ample documentation from respected economists who say the opposite, that there is not evidence that it has a significant impact on jobs and that, to the contrary, it's beneficial to the economy and to efficiency and productivity," Carney said in a Tuesday briefing with reporters. "And the theory behind the opposition to raising the minimum wage, that it costs jobs, if you –- if you tease it out all the way, then there shouldn't be a minimum wage at all."

As expected, the office of House Speaker John Boehner (R-Ohio) held up the prediction on job loss as evidence the proposal is misguided.

"This report confirms what we’ve long known: while helping some, mandating higher wages has real costs, including fewer people working," said Brendan Buck, a Boehner spokesman. With unemployment Americans’ top concern, our focus should be creating –- not destroying –- jobs for those who need them most."

Over the years, economists have produced reams of studies with data that either supports or disputes the wisdom of a minimum wage hike -- and often does both -- and the debate tends to fall along predictable political lines. The CBO report merely adds to an already large body of research, but its forecast of job loss may make it more advantageous to Republicans than Democrats in the ongoing discussion.

The office of Rep. George Miller (D-Calif.), who sponsored the House bill, criticized the CBO for its "institutional" view that minimum wage raises lead to job loss. Miller's office noted that 600 economists, including seven Nobel Prize winners, signed a letter last month supporting the Democrats' proposal, and said that the projected drop in poverty shows the proposal's true benefits.

"While CBO has reproduced an outdated view of the employment effects of the minimum wage, this report’s findings on poverty reduction add to the forward momentum created by more than 600 economists, savvy businesses across the country, and millions of hard-working American families who understand that a wage increase will boost the economy," Miller said in a statement.

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