The report says any similar proposal to President Obama's would cost 500,000 jobs. CBO: Wage hike will cause job loss

Raising the minimum wage would cost thousands of jobs while simultaneously lifting wages for millions more, according to a new report that instantly inflamed an election-year battle over income inequality.

Giving fodder to both Democrats and Republicans, the Congressional Budget Office said Tuesday that a proposal similar to one offered by President Barack Obama would reduce total employment by 500,000 workers or about .3 percent by 2016.


At the same time, it would boost earnings for some 16.5 million people, lifting 900,000 above the poverty line, the report said.

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The analysis lands in the middle of an election-year debate over Democrats’ proposal to lift the minimum wage for the first time since 2009. In his State of the Union, Obama called for increasing it to $10.10 from the current $7.25. The idea is stalled in Congress, where Republicans say it would hurt the economy by making it more expensive for businesses to hire. Some Republicans have instead called for expanding the earned income tax credit, a wage supplement to the working poor.

Amid the gridlock, Obama signed an executive order earlier this month requiring federal contractors to begin paying at least $10.10 an hour.

Both parties seized on the findings to make their case.

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Republicans highlighted the projected job losses.

“The non-partisan Congressional Budget Office confirmed yet again what we know to be true of government overreach in the marketplace: raising the minimum wage would slash jobs and harm an already fragile workforce,” said Sen. John Cornyn, the chamber’s second-ranking Republican.

House Democratic Leader Nancy Pelosi said: “No matter how the critics spin this report, the CBO made it absolutely clear: raising the minimum wage would lift almost one million Americans out of poverty, increase the pay of low-income workers by $31 billion and help build an economy that works for everyone.”

In a blog post, the administration said CBO was overstating the likely job losses.

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“CBO’s estimates of the impact of raising the minimum wage on employment does not reflect the current consensus view of economists,” said Jason Furman, head of the Council of Economic Advisors. “The bulk of academic studies have concluded that the effects on unemployment of minimum wage increases in the range now under consideration are likely to be small to nonexistent.”

About 5.5 million workers earned within 25 cents of the minimum wage in 2013, according to the report. Three-quarters were at least 20 years old and two-fifths worked full time.

Phasing in the increase over three years would cost some low-earners their jobs as their labor became more expensive. About 1.5 percent of the 33 million people otherwise projected to earn less than $11.50 in 2016 would be unemployed as a result of the wage hike.

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About 16.5 million people earning less than $10.10 would see a pay bump, along with an indeterminate number of people earning just a bit more, as employers strive to keep a wage differential between workers.

The increase would have a relatively modest impact on poverty, the report shows, cutting the projected 45 million people living in poverty in 2016 by 2 percent, or about 900,000. Their average real income would grow by $300 or about 2.8 percent, as a result of the increase, the report said.

The impact on poverty would be diluted in part because some of the workers, such as teenagers, live in higher-income families. While most of the increased income would go to lower-earning families, about 29 percent would accrue to families earning three times to poverty threshold — about $72,000 for a family of four in 2016 — and 6 percent would go to ones earning six times the poverty level.

Twenty-one states along with the District of Columbia have already increased their minimum wages above the federal level. California is scheduled to lift its minimum wage to $10 by 2016.