Working for minimum wage is a financial stretch at $10.45 per hour

Jury’s out on $15 minimum wage

Whether raising B.C.’s minimum wage to $15 an hour will help fix poverty or suffocate businesses that rely on low-income earners to succeed.

The jury remains out on whether raising B.C.’s minimum wage to $15 an hour will help fix poverty or suffocate businesses that rely on low-income earners to succeed.

But there is little doubt it is something advocates for the working poor want to try.

B.C. NDP leader John Horgan served notice he wants to make it a central issue of next May’s provincial election when he pledged last month to up the current rate of $10.45 an hour to $15 by 2021.

Gord Fuller, a long-time mid-island anti-poverty advocate said an additional four or five dollars when you are only making $10 or $11 can be significant.

“Oh, it definitely helps,” he said. “It makes food more affordable. It makes rent more affordable. It gives you a lot more buying power.”

Critics of the move point to the strain it could put on businesses and suggest it could hurt as many people as it helps. Fuller thinks that may be overstated.

A study done by economist John Schmitt for the Washington DC-based Center for Economic and Policy Research concluded that minimum wage levels have little impact on levels of employment.

The study  found that rather than laying off employees, most firms release the pressure caused by the wage increase through other avenues like cutting benefits; cutting the wages of more highly-paid workers; finding production efficiencies; and raising prices.

But the research is hardly unanimous.

A similar survey of pre-existing research released in a book in 2008 by American economists William Wascher and David Neumark showed a one or two per cent reduction in teenage or very low-skill jobs for each 10 per cent minimum-wage increase.

The same authors also found that while minimum wage increases help some families get out of poverty, they can lead others to fall into poverty.

James Byrne, the regional managing partner for MNP Vancouver Island said it’s common sense that businesses will have to find a way to compensate for increased costs.

“When we look at the dollars, that will have a significant cost to profitability. Because we are raising the costs, it will impact on the way they do business,” he said.

A 2013 study by the American congressional budget office showed increasing a $7.25 an hour minimum wage by about $2 would increase the standard of living for about 7.6 million people, while sacrificing about 100,000 jobs. Meanwhile, a $3 increase would increase the standard of living for about 16.5 million people, but cost 500,000 jobs.

A 2014 Canadian study by Diane Galarneau and Eric Fecteau for StatsCan found the number of Canadians making minimum wage increased from five to 6.7 per cent between 1997 and 2013.

“In Canada, the effects of an increase in the minimum wage on total employment would typically be small or non-existent,” the study states.

Horgan said minimum wage is not something that is just an issue for teenagers working their first jobs,

“Students, parents, seniors, new Canadians in every part of the economy are paid minimum wage,” he said in the media release announcing his $15 pledge. “It’s not good enough that people are working full time or more just to keep their heads above water.”

B.C.’s Liberal government has announced increases for September 2016 and 2017, on top of previously scheduled cost-of-living increases expected to bring the province’s minimum wage up to $11.25 by next fall. Premier Christy Clark said that would give B.C. — currently the lowest in the country — the third highest rate in Canada.

B.C. Minister of Social Development and Social Innovation Michelle Stilwell believes a $15 minimum wage is counter-productive: you can’t force businesses to pay high wages to unskilled labour and expect them to thrive.

She said her government’s anti-poverty focus is on a strong economy creating a demand for workers, combined with training opportunities that job seekers can access to meet that demand.

“I strongly feel we have to stick with the path,” she said.

 

 

 

john.mckinley@blackpress.ca