US Economy

Stiglitz touts the merits of an increased minimum wage

Joseph Stiglitz
Bloomberg | Getty Images

A minimum wage increase to $10.10 an hour would increase living standards for up to 25 million people in America without leading to significant job losses or other costs, according to a panel of economists.

Joseph Stiglitz, Lawrence Katz, Heidi Shierholz, and Robert Greenstein discussed a report released Tuesday by the Congressional Budget Office showing that while a minimum wage hike would likely result in wage increases for 16.5 million Americans currently earning the minimum wage, it could also force businesses to cut around 500,000 jobs.

"The CBO analysis underestimated the benefits and overestimated the costs in several respects" said Stiglitz said on a conference call with reporters on Tuesday.

(Read more: $10.10 minimum wage could hit total employment: CBO)

Minimum wage, maximum impact

The panelists largely agreed that the CBO report went a bit far in projecting that a minimum wage hike to $10.10 per hour would put half a million jobs at risk.

The CBO report was an analysis of the various published works available to economists, and panelist Lawrence Katz argued the CBO relied too much on findings from less reliable studies to form its estimates.

A paper that panelist Katz co-authored with Princeton University economist Alan Kreuger found that increases in state minimum wages in New Jersey had no impact on jobs numbers in the fast food industry.

Data from the Economic Policy Institute—which supports a wage increase—suggest a hike could even stimulate employment. Having more cash on hand might mean people on lower incomes would be encouraged to spend more, actually increasing overall demand, argued EPI's Heidi Shierholz.

The CBO report does have a significant margin of error, saying the number of jobs lost could range from almost none up to a million.

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"Even if you accept the CBO number, that would mean the number of workers getting a wage gain is 50 times the number of jobs lost," said Robert Greenstein, of the Center on Budget and Policy Priorities.

A minimum wage increase would also have "spillover effects," effectively raising wages for workers already earning wages above minimum as employers adjust their wage schemes, Stiglitz said.

The group found the CBO's proposed alternative of a $9 per hour increase far less compelling.

(Watch: )

"Even using all of CBO's figures, you still get an effect three to five times greater from the $10.10 option rather than the $9 option," Greenstein said.

The Obama administration has pushed for a minimum wage increase for months, and the president most recently issued an executive order mandating that all federal contract employees receive a minimum wage of $10.10.

Even still, no one should expect a widespread wage hike soon.

"In the past, when there have been efforts to raise the minimum, it has taken several years, and even one or two Congresses," to get it done, Greenstein said.