Slaying The Minimum Wage Boogeyman (And Some News)

Before I jump in, a few housekeeping items. I have a new landing page for my blog at political-potshots.com. I will be looking add more functionality soon. I would also like to announce that I have joined the family at Progressive Bloggers! I have long admired this website, and it is an honour to join.


Here we go again, having to defend increasing the minimum wage, or fight for an increased minimum wage. Why does the Fraser Institute/Conservative Party/Canadian Taxpayer Federation echo chamber continually try and convince us that lower wages are in our best interests – despite all the proof to the contrary about minimum wage increases not causing job losses or lower hours.

Job losses predicted by opponents of minimum wage increases often misrepresent existing economic research. It is important to note that estimates/reports showing job loss effects of minimum wage increases apply only to teenagers. Effects for YA/adults range from insignificant to non-existent. Focusing on teenage workers enforces an inaccurate stereotype (which is often the point of negative minimum wage media campaigns) about who earns low wages/minimum wage in and leads to exaggerated claims about job losses. Only 26% of those currently making minimum wage are teenagers, and 5% of those making between $12-$15 are teens.

In BC, in 2011 when minimum wage was raised from $8 to $10.25 over a year, the Fraser Institute (FI) claimed the increase would result in a staggering loss of over 52,000 jobs. In reality, employment for 15–24-year olds declined by 1.6 per cent, 1/10 of FI projections, the only age sector to experience job losses.

First of all lets look at a historic study of American Minimum Wage increases and how that the unemployment rates decreased and a net GDP increase occurred after minimum wage increases.

RAISE WAGES, KILL JOBS? SEVEN DECADES OF HISTORICAL DATA FIND NO CORRELATION BETWEEN MINIMUM WAGE INCREASES AND EMPLOYMENT LEVELS

And in Canada: What is a Minimum Wage For? Empirical Results and Theories of Justice

Past minimum wage increases in Canada suggest that higher minimum wages lead to lower turnover rates, meaning workers are more likely to have more stability. This may be because a higher minimum wage reduces the need for employers to operate on a low wage/high turnover model. This reduces the costs for employers in hiring and training new employees.

Critics frequently dismiss minimum wage as a poverty reduction tool because past increases have not led to a reduction in the poverty rate. This is because the minimum wage has been set so far below the poverty line that past increases haven’t been large enough to lift full-time workers out of poverty. In Ontario, the minimum wage increase to $11.40 still left that employee living in Toronto close to $5000 below the poverty line. The increase to $15 will lift that employee over the poverty line. That is real change. It also reduces costs to the province and municipalities for social programs that are disproportionately used by the working poor.

In this amazing 2014 study, Minimum Wages and the Distribution of Family Incomes, Arin Dube finds a negative relationship between the minimum wage and poverty. Specifically, increasing the minimum wage 10% would reduce the number of people living in poverty 2.4 percent (by negative relationship/correlation I mean to say the minimum wage has an “elasticity” of -0.24 when it comes to poverty reduction).

This is the truth vs. myth when discussing minimum wage. This is who Conservatives try to convince are worth less money than the poverty line.

To sum up. the January 2018 minimum wage increase in Ontario, lead to no additional job losses beyond the seasonal norm according to this Scotiabank study:

And here: Tracking the Early Impact of the Minimum Wage CONTACTS Increase in Ontario (May 2018 Update)

So we have established that 1) Job losses created by a minimum wage increase are a myth, as BC’s numbers in 2011 and Ontario in 2018 show no correlation between job loss or hour reductions and a minimum wage increase. 2) increasing minimum wages can act as an effective tool in reducing poverty. 3) While there is a small inflationary impact after a minimum wage increase, the impacts are minimal, that a 0.4 per cent increase in overall prices follows 10 per cent increase in the minimum wage. This impact is shown in this Bank of Canada study. Any inflationary impact is mitigated by an increase in spending and consumption.

Perhaps it is time for Conservatives to stop with the scare tactics, put this straw man to rest and admit that minimum wage increases have had a net positive outcome in increasing money entering the economy, job stability for lower income earners, and can help cut down on the financial burdens being felt by governments on social assistance spending. Numbers don’t lie, but people do – and there is no denying the positive correlation of consumer confidence index increases after minimum wage increases which creates its own form of economic stimulus.

Charles Darwin once wrote, “If the misery of the poor be caused not by the laws of nature, but by our institutions, great is our sin.” One of the key institutions of our modern economy is the minimum wage, and increasing the minimum wage can dramatically reduce the misery of the poor. What would it say about us if we didn’t take advantage of it?

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.