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As the last labour day of the millennium approaches, the Canadian Centre for Policy Alternatives is calling for a substantial increase in the minimum wage. In a major new study released today, the Centre dispels numerous myths about minimum wages, and argues that minimum wage increases will disproportionately benefit low-income workers and families.
The study, entitled Raising the Floor: The Economic and Social Benefits of Minimum Wages in Canada, is written by two CCPA research associates: Michael Goldberg, research director with the Social Planning and Research Council of BC; and David Green, associate professor of economics at the University of British Columbia.
“This study clearly disputes the claim that minimum wages are a major killer of jobs,” says Green. “Our research indicates that minimum wage increases have only marginal effects on employment. But more importantly, even under the most conservative assumptions, minimum wage increases lead to an increase in the total wages paid to low wage workers.”
The study uses the latest available data for Canada’s four most populous provinces — Ontario, Quebec, BC and Alberta — to profile who minimum wage workers are, to analyze what impact minimum wages have on employment, and to make policy recommendations.
“Simplistic claims that large damage will result from minimum wage increases cannot be supported,” says Green. “Over the past two decades, large increases in the minimum wage have been followed by both increases and decreases in employment, demonstrating that other trends in the economy have much more influence on employment than does the minimum wage. Our study uses the latest data and multiple economic regression analyses to measure the employment impact of minimum wages, and for all ages and gender groups we find the impact to be very small.”
“The minimum wage is not a panacea,” says Goldberg. “But it is an important tool in the social policy toolbox for raising the floor for low-wage workers and meeting anti-poverty goals. We have found that, after inflation, real minimum wages in Canada have dropped dramatically from their peak in the mid 1970s. All provinces need to restore the purchasing power of the minimum wage.”
“BC has the highest provincial minimum wage in Canada,” reports Goldberg. “But even in BC, someone working full-year at minimum wage for 40 hours a week will still only make a pre-tax income of $14,872. That’s too low. No one working full-time should be below the poverty line.”
The study calls for the minimum wage in BC to be increased to $8.00 per hour. At that level, someone working full-year for 40 hours a week would have a gross income of $16,640 — equivalent to Statistics Canada’s Low Income Cut Off line for a single person in a major urban area (more commonly referred to as the poverty line). Goldberg and Green recommend that all four of Canada’s most populous provinces set out a schedule to bring their minimum wages in line with the poverty line. “On the last labour day of the millennium, there should be agreement that such a move is fair and reasonable,” concludes Goldberg.
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