If A Modest Increase In The Wages Of A Few Workers Is Good For The Economy…

Liberals are fond of arguing that raising the minimum wage is good for the economy because the increased spending it produces will produce a greater demand for goods and services, which will produce … well, you get the idea.

Here’s a typical example from Think Progress, citing a study arguing that “a minimum wage hike would stimulate the economy.”

The authors found that raising the wage by $1.75 would increase household spending by about $48 billion the following year, which amounts to .3 percent of GDP. If the possibility of job losses is taken into consideration, the authors calculate that spending would still go up by $28 billion, or .2 percent of GDP….

Because minimum wage earners tend to be low-income and are likely to spend more of their income, raising their wages is particularly beneficial. As the authors explain, “In the near term, a minimum wage hike can stimulate economic activity by putting money into the hands of people who are especially likely to spend it.”

The cited study assumed an increase to $9 an hour, not the $10.10 recently proposed, and it did not have the benefit of the CBO’s recent finding that such an increase would produce a job loss, by 2016, of between a slight number and 1,000,000, with 500,000 being the most probable. But leave that aside now and assume, for the sake of argument, that the Think Progress-cited study is correct, and further that an increase to $10.10 would thus stimulate the economy even more.

Now, with that liberal prediction of an increase in spending of $28 billion or more in mind as a result of raising the minimum wage of a relatively  small number of workers (“4.7 percent of the 75.3 million workers age 16 and over who were paid at hourly rates,” according to the Bureau of Labor Statistics), consider the following report in the Weekly Standard, based on another recent finding of the CBO — that by 2017  Obamacare will result in a reduction of the number of hours that otherwise would have been worked by 2.3 million workers. From the Weekly Standard:

New analysis by the minority-side of the Senate Budget Committee finds that Obamacare will reduce compensation by more than $1 trillion between 2017-2024….

“The Congressional Budget Office (CBO) estimates that Obamacare will “cause a reduction of roughly 1 percent in aggregate labor compensation [wages, salaries, and fringe benefits] over the 2017-2024 period, compared with what would have been otherwise” (see page 117 of appendix C of CBO’s February 2014 Budget and Economic Outlook). CBO also suggests that the largest effect will occur among lower-wage workers who were the target of the law’s subsidized coverage expansion,” says a statement from the Republican-side of the Senate Budget Committee, explaining their methodology.

If increasing the spending of some workers by $28 billion is good for the economy, what will be the effect of reducing the compensation paid to workers by over a trillion dollars?