“It predicts that up to a million jobs will be lost if you pass your wage hike.”
–Faux fortune teller to faux President Obama, in TV ad sponsored by the Employment Policies Institute
It’s hard to resist putting together a Truth Teller video (above) for an ad that features a fortune teller, especially one that features research from one of the Fact Checker’s most cited organizations, the Congressional Budget Office. So let’s dig in.
The Employment Policies Institute bills itself as a “non-profit research organization dedicated to studying public policy issues surrounding employment growth.” But in reality it is tied to a public relations firm that flacks for the restaurant industry, among the biggest opponents of a boost in the minimum wage. As The New York Times reported earlier in 2014, EPI does not have employees of its own; the PR firm “bills” EPI for the services that are provided, to the tune of $1.1 million in 2012.
The White House has pushed to increase the minimum wage, in three stages, from the current level of $7.25 an hour to $10.10 in 2016, and EPI has been one of the leading opponents against the plan, arguing the move will costs jobs.
As anyone who has studied Economics 101 knows, basic economic theory holds that higher employee costs means lower employment. But among economists, there is a sharp debate about the level of job loss, especially if the increase in the wage is minimal.
As our colleague Zach Goldfarb reported, White House strategists in 2013 rejected a $10.10 rate on the grounds that it would destroy jobs–but then shifted course earlier this year for political reasons.
In February, the CBO weighed in and said in a report that a $10.10 minimum wage by 2016 would reduce employment by 500,000 workers because of two key reasons: consumers would buy fewer goods because of higher prices resulting from a minimum wage and because employers would hire fewer workers because the cost of labor has increased. (This is a net figure. Some workers would get hired because of an increased demand for goods and services from the newly-flush minimum wage workers.)
In effect, CBO said, “about 1.5 percent of the 33 million workers who otherwise would have earned less than $11.50 per hour would be jobless—either because they lost a job or because they could not find a job—as a result of the increase in the minimum wage.”
So how does EPI get to claim “up to 1 million jobs will be lost”? That because it took the high end of the range that CBO also provided—“very slight decrease to -1.0 million workers.”
These are only estimates, and it’s to CBO’s credit that it indicates a possible range. But regular readers know that previously we have faulted politicians who have seized on the CBO’s worst-case estimates. (In fact, in an accompanying radio ad, EPI cites the 500,000 figure.)
While the TV ad claims that these jobs would be lost, it’s worth remembering that this estimate is for two years in the future, so it includes jobs that have not been created yet. The CBO report also highlights the possible benefits of a minimum wage hike, such as pulling 900,000 people out of poverty.
Michael Saltsman, EPI’s research director, defended the phrasing. “It is an accurate way to describe the report,” he said. “If the CBO report says that up to 1 million jobs will be lost, I think it is entirely fair game to put it in an advertisement.”
He noted that the 30-second ad was focused on the job-loss aspects of the CBO report and thus there was no need to mention other aspects of the report. He asked: “Is it worth losing up to 1 million jobs to pull 900,000 out of poverty?
The Pinocchio Test
The CBO report is political gold for opponents of a minimum-wage hike, so there really was no need to goose the results, especially if one of the ad’s actors is going to wave an actual copy of the report. That visual image might fool viewers into believing the ad was telling the whole story about CBO’s estimate.
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