Just in time for Thanksgiving – Minimum Wage Increases

“Thanksgiving: Bringing out the best in family dysfunction since 1863.” Unknown

Back in 2015, the newly elected NDP government began raising the minimum wage rapidly. When it started, in the midst of a once in a generation recession, Alberta’s rate was the lowest in Canada.  This October 1st, after a series on annual increases – it is the highest, at $15 per hour.

In Canada in 2013, the minimum wage was around $10 in all provinces. In constant dollars, this rate was similar to the rate observed in the late ’70s. About 5 to 7% of the working population was at minimum wage. The province’s low income earners got about 42 – 50% of average hourly earnings in their province.

In Alberta in 2013, there were 34,000 people (2% of workers) at the minimum wage level of $9.75.  As the wage rate rises and with weak economic growth, more people are at the higher level today. Today 254,000 workers, or about 11% of the workforce, earn less than $15 per hour. There is a blizzard of factoids about what it means. And enough contradictory data to defend any position you might want to argue over turkey dinner.

You can join one of the two main camps – either the folks who see it as a matter of “social justice”  or those who see it as “competitiveness lost”.

So here is a handy guide you can use to present your point of view:

It’s about Social Justice!

  1. Higher wages at the bottom end of the spectrum reduce “wage inequality”
  2. The minimum wage has just barely kept up with inflation since the 1970s. It was too low then and the cost of living in Alberta has gone up dramatically, making it harder for the working poor to make ends meet.
  3. Women make up a higher proportion of low-wage earners thus an increase will differentially benefit them.
  4. The new income will be spent creating more activity in the economy, albeit not really creating new wealth.
  5. Higher wages encourage greater labor-force participation.

 

It’s about Competitiveness Lost!

  1. Raising the minimum wage is an inefficient poverty reduction measure because 90% of low-income earners are not in poverty.  About 30% are students or under 24 and almost all are living with their parents.
  2. The rate increases are too fast, too much, for many businesses to absorb. Increases come at time when government is adding costs to business through new labor standards in the midst of a weak economy.
  3. Business will be forced to forego hiring, reduce hours and move to automate jobs thus impacting job growth. An economist from the University of Alberta estimates that 25,000 fewer jobs will be created as a result of increasing wages.
  4. There will be a ‘wages push’ from those who want increases comparable to what their lower income colleagues received, thus increasing costs to be passed on to consumers. It will reduce profitability for small and medium-sized businesses who cannot easily pass on these costs.
  5. The job prospects for younger inexperienced workers will be impacted because employers will seek more experienced workers to create better “value for money” for their wage dollars.

Happy Thanksgiving.  The debate winners get the drumstick and the wishbone!