Economics

Wacky world of minimum wages

B.C. has lowest minimum wage in Canada, CBC, September 2009:

As of Tuesday, B.C. has the distinction of having the lowest minimum wage in the country…

The B.C. government has steadfastly refused to increase the wage, saying it would hurt business and result in fewer jobs for young people.

Champion of working people Gordon Campbell froze the minimum wage for ten years.

After Christy Clark became Premier in 2011, her Government immediately raised the rate from $8.00 to $8.75 and promised another boost to $9.50 would follow six months later. By no coincidence, an election that many expected Liberals to lose was pending.

In July 2017, BC’s new NDP Government increased the minimum wage by 50 cents and followed with a plan to move the minimum above $15 an hour by 2021.

Of course, BC Liberals objected. Said Chilliwack MLA John Martin, the BC Liberal labour critic:

Overall it’s a pretty frightening time for small and medium-sized businesses. We’ve seen in Alberta the job losses that now are being specifically associated with a rapid increase in the minimum wage.

Incidentally, Martin is the guy who worried that regulations aimed at protecting children from workplace injury and exploitation would make it impossible for 13-year-olds to save up for new bicycles.

Complaints are often heard from from LibCons when people-friendly governments impose workplace improvements. They prefer the opposite. This year in Alberta, Jason Kenney cut the minimum wage for young workers by $2.00 an hour, saying it was still a very generous wage because it was a lot more than nothing.

If business groups and right-wing politicians were correct, BC NDP increasing the minimum wage 28% in two years ought to be causing the province’s economy to collapse. So, how comes this?

  • Provincial GDP grew more in BC than the national average,
  • BC had the lowest unemployment rate in Canada throughout 2018,
  • BC wage growth (nominal) at 5.9%, (h/t UBC Prof. Kevin Milligan),
  • Provincial government direct operating debt eliminated,
  • Taxpayer–supported debt to GDP is the lowest in a decade,
  • All four major rating agencies affirmed BC’s high credit ratings.

Institute for Research on Labor and Employment, University of California, Berkeley, examined concerns about negative impacts of paying more to workers at the bottom margin. IRLE published a paper this month titled Minimum Wage Effects in Low-Wage Areas

We find positive wage effects but do not detect adverse effects on employment, weekly hours or annual weeks worked. We do not find negative employment effects among women, blacks and/or Hispanics. We do find substantial declines in household and child poverty.

This finding, and others like it, will not change the minds of people who prefer economic rewards go to the wealthy, not the poor.

Yet, there are common sense conclusions we can make.

Raising the income of already wealthy citizens encourages them to buy more non-essential and luxury goods, travel internationally, and expand savings and the use of income shelters and tax havens.

Increasing income of the working poor ensures that extra dollars are spent in local communities on things like food, clothing, medical and dental care, and housing.

According to the University of California report, higher minimum wages reduce poverty rates among households and children, without affecting employment levels.

To most of us, that is an admirable outcome.

Categories: Economics, Labour

8 replies »

    • First, I am cautious about anything put out by the Corbett Report. It is a right-wing biased conspiracy site with a factual reporting rating of LOW on the website Media Bias/Fact Check (MBFC).

      The academic featured on your linked video revised his early conclusions, after it was faulted by other academics, including Arindrajit Dube of the University of Massachusetts. Dube found:

      On average, minimum-wage increases eliminated jobs paying below the new minimum, but added jobs paying at or above the new minimum.

      The UM study sample involved 137 minimum-wage events as opposed to the one event examined in the first UW paper Vigdor helped author.

      The effects of 137 minimum wage hikes, in one chart

      UW researchers revised their 2017 conclusions and put out a paper a year later that caused the New York Times to ask, “Why Did They Flip?”

      The NYT article reported on the first UW report:

      Economic Policy Institute, pointed out that UW research failed to adequately account for the fact that Seattle’s economy was growing rapidly when the minimum wage increases took effect.

      In a booming economy, Mr. Zipperer argued, we would expect to see fewer workers employed at low wages — not because employers decide it’s not worth hiring people, but because the competition for workers bids up wages, and many low-paying jobs disappear and are replaced by somewhat higher-paying jobs.

      Six reasons not to put too much weight on the new study of Seattle’s minimum wage

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  1. keeping wages low is a subsidy for businesses. if a company can’t afford to pay its workers an extra dollar or two per hour, they don’t have a decent business model and ought to be finding something else to do. Min. wage jobs are not just in small businesses but in corporate businesses and the people working these jobs are no longer kids working their way through school. They are adults who for whatever reason don’t fit into higher education, can’t get the higher educations required for the more technological jobs. Low min. wage is a method of keeping a pool of workers who won’t get ahead but worse, their children won’t either.

    If low wages were a benefit to a society, places like Asia, Africia, etc. would all be having great societies, great jobs, great everything, but they don’t. They’re amongst the poorest in the world and all because people make low wages. When we look at poverty in Mexico, its because of low wages. People working in those car manfucturing plants are making $4 or $5 a hr. its tough to get by on. People are poor because their wages do not keep up with the cost of living. it is only when people have higher wages that they can improve the quality of their lives, via being able to pay for health care the system doesn’t cover, better housing, food, etc.

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  2. Roughly 16 years ago my son-in-law finished high school in France; went to work at a MacDonalds and got 11 Euros per hour which, back then was about C$17.00 per hour. If he got a job back then here in beautiful BC he would get C$6.00 per hour. Remember the mantra back then by younger people; “Six bucks sucks”. Should be interesting to find out what a MacDonalds worker gets in a Scandinavian/Northern European country compared to here. Some bonehead here will probably point out that they have a higher income tax but will conveniently forget to mention that those countries have free post-secondary education.

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  3. Just found out what a Mcdonald’s pays for a beginner worker in Oslo, Norway. As of 2017-08-07, Norsk Kroner 126.98 or US$15.98.

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  4. Re: Exchange at top of thread…
    Nobody fisks reviewer comments like Norm fisks reviewer comments.
    It never ceases to amaze me that, instead of doing what Norm does to improve discourse the big proMedia sites instead are running away from media threads as fast as they can.

    Like

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