Few topics are as controversial right now in Canada as raising the minimum wage.
Last week the B.C. government announced a 50-cent increase starting next month. The NDP says this was the first move toward the goal of reaching a $15-an-hour minimum wage by 2021. Meanwhile Alberta and Ontario plan to reach the $15 mark by 2018.
The argument of those who agree with the minimum wage increase is that it would not only be beneficial for low-income earners, but it would also be good for the overall economy. The logic is that when low-income earners receive a wage increase, they tend to spend it all on everyday necessities – and this, in turn, would positively impact the economy.
Meanwhile others argue that raising the minimum wage would hurt small businesses, which would then have to offset their increased expenses by reducing hours and laying off employees. This would then hurt low-income workers, who this initiative was intended to help, while at the same time hurting the overall economy.
The B.C. government claims that a minimum wage increase will benefit close to 100,000 British Columbians. But while raising the minimum wage might seem like a good idea to lift people out of poverty, it’s important to know who exactly is included in this demographic.
In 2016, the percentage of employees earning minimum wage in British Columbia was 4.8 per cent, or 93,800 people. Of this total, the large majority (54 per cent) were youth aged 15 to 24 years old. This means that a large portion of low-income earners in Canada are teenagers who are still living with their parents and therefore don’t depend on their income for survival.
This raises the question of whether raising the minimum wage would be the best way to lift people (who really need it) out of poverty. After all, there are other ways to lift people out of poverty. Canada could use its tax system to redistribute wealth, and many defend the idea of a guaranteed basic income.
But when economists themselves disagree on the issue of raising the minimum wage, it makes the rest of us mortals wonder what will actually happen once these changes come into effect.
Last month 40 Canadian economists wrote an open letter to the Ontario premier endorsing the proposed provincial wage increase. According to the group of economists, the “doom-and-gloom” predictions about the impact of minimum wage increases are not supported by evidence.
Meanwhile many analysts – including Charles Lammam, Hugh MacIntyre and David Hunt with the Fraser Institute – disagree. They say that despite what the Canadian economists of the open letter claim, 20 Canadian studies published in academic journals dating back to 1979 produced a clear consensus – that minimum wage hikes reduce employment opportunities.