Minimum wage: A step forward, but Canada did not need a boost

Image copyright Getty Images Image caption Community groups and Ontario Premier Doug Ford have spent months in an effort to head off the increase

Image copyright Getty Images Image caption Doug Ford joined major business groups in their opposition to the increase

The minimum wage in Ontario has been increased to $14 an hour – the highest in Canada.

It’s long overdue, and with inflation at 3%, the increase is going to be a welcome relief for many struggling workers.

And who could disagree with a hike in the minimum wage?

An increase in the minimum wage should be a key ingredient in any successful economic strategy – and so it is for Britain – but it shouldn’t be a given that the country should follow the path blazed by Ontario.

The Ontario’s minimum wage increase had the backing of business groups who were worried that the increase would reduce business competitiveness.

Still, many community groups and the labour movement argued that the increase was long overdue.

Trade unions urged workers to lobby for an increase, and thousands of demonstrators took to the streets to protest the decision.

More than 30 protest petitions demanding a higher minimum wage were launched, and most of them were supported by many of the province’s major labour unions.

Despite the economic benefit, every time an increase in the minimum wage is announced, politicians from all sides argue that a major retailer or a major business group will suffer, or that the increase will give them added pricing power, or that it will spark a shortage of workers and hurt service providers.

Image copyright Zuma Image caption Jared Leto, from Dallas Buyers Club, and leading actress Lupita Nyong’o presented United Way, which has been a proponent of a higher minimum wage, with a new award

None of this justifies the general view that the increases lead to increased unemployment.

The largest academic study on this question, published in the American Economic Review last year, actually found that the increase in the minimum wage appears to have a mostly benign effect on labour.

So do the other studies that have been done.

And although most employment figures reported in Canada for 2017 showed that the number of full-time workers increased compared to the previous year, this increase would certainly have more to do with population growth in the provinces that have the highest minimum wages than with the national minimum wage increase.

And other studies have shown that the number of people who actually leave the labour force when their wages go up is actually very small.

When minimum wages go up, there will be job losses in sectors in which people rely on low wages. But these are relatively few in number and are offset by more people who start jobs or take jobs that previously they would have declined to accept.

And all of these measures make a decent minimum wage a more effective economic stimulus than the government handing out handouts.

There will inevitably be excess growth in lower-wage jobs in response to the increase in the minimum wage. That in turn creates winners and losers.

But in the end, there are no trade-offs here, because if an increase in the minimum wage actually causes a reduction in employment, all of the measures taken in response to it will do more good than harm.

In Canada, at least, we know this for sure.

Unfair labour standards are bad for business and bad for the economy.

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