Increasing Minimum Wage — Friend or Foe?
Hiking up the provincial minimum wages to $15 an hour seems to be the trend that is going on in Canada recently. At first thought, this seems rather plausible given the fact that living in Canada is by no means a cheap affair. Yet, as with any new law, there are advantages and implications that come as a result of its nature. There are always parties that will gain from this, and there are those who will lose as well. Increasing minimum wage is an example of one of the laws that require consideration of both sides before it can be passed, so the question to ask is, will increasing minimum wage provide more benefits than consequences?
Provinces such as Ontario, Alberta and British Columbia are all working on increasing minimum wage to $15 an hour in the next few years. Alberta is planning to increase it that amount by October 2018, Ontario by January 2019 and British Columbia by 2021.
In Ontario, the Liberal government is trying to increase minimum wage from the forthcoming increase of $11.40 an hour to $14 an hour in January and hit $15 an hour in 2019. The Financial Accountability Office (TFAO) warns that 50,000 jobs will be lost with an increase in minimum wage to $15 an hour, despite the fact that the loss will be only 0.7% of total employment. These job losses are concentrated among the teens and young adults (who often work for minimum wage or less). Additionally, higher minimum wage will increase operating costs for businesses, thus resulting in losses for lower income workers (a huge concern for business groups in Canada). On the other hand, it will be great for people who have been working for very little so far. Higher labour income and spending will boost spending and economic activity, offsetting job gains. This law will be particularly impactful in the near future as it is projected that the number of minimum wage workers will increase from 520,000 to 1.6 million by 2019. But as the cost of doing business increases, people will be more pressured to work full-day and vacations will become less frequent.
Alberta’s aim to increase minimum wage to $15 an hour has resulted in businesses warning of increased expenses, job cuts, losses and closures as well. As Alberta has been slowly increasing the rates, restaurants and other businesses that depend on minimum wage workers have to re-evaluate operations costs — businesses have already determined that this increase can cut 2% of employment. As a result, businesses are urging the province to increase the wage at a slower rate (over course of 5 years) so there is more recovery time. Similarly, Ontario’s Labour Ministry counters this by saying that the province is expecting economic growth paired with the increase in exports so businesses are hiring more even though not everyone will benefit from this. Minimum wage increases are targeted to helping those who are part of the “working poor”, since in Alberta, 16% of employees earn less than $15 an hour and 4.5% earn at minimum wage.
In British Columbia, the Fair Wages Commission had a first public meeting regarding the increase of minimum wage to $15 an hour by 2021. In September, government increased minimum wage by 50 cents to $11.35. These public meetings are held to gauge how the public sees the circumstances and to put together an advisory report for Provincial government. Representatives are also talking to individuals about this issue. About 100 people have signed up to speak at the meetings, consisting of workers, employers and poverty group advocates (this helps to hear from all sides). Advocates are saying that increasing minimum wage will make it more affordable to live in British Columbia, but businesses argue that raising the wage too fast will be costly for the economy and jobs. The commission is also looking at the discrepancy between living standards of those who make less than $15 an hour and those who make more to evaluate to what extent the value will override the costs of implementing this law.
Evidently, there are considerable benefits to increasing the minimum wage to $15 an hour, especially for those who have been earning much less at the current wages. This is especially useful for young adults who just entering the workforce to gain some more money as well. Nonetheless, there are economic implications in terms of job losses, cuts and a higher unemployment rate that is foreseen as a result of an increase in minimum wage. Overall, provincial governments are still intent on going through with this plan to increase minimum wage in hopes that the net result will be a positive one.
