The logic behind the B.C. Federation of Labour’s minimum wage argument sounds straightforward: raising the minimum wage leads to more money in the hands of lower income earners, which then lifts them out of poverty. It sounds like it should work, right? Unfortunately, the unions’ simple-minded logic isn’t grounded in reality.
Contrary to what unions may say, the majority of minimum wage jobs are held by those -- usually young people -- who live in non-poverty households (e.g. teenagers working as waiters). Raising the minimum wage would do little to help struggling families make ends meet, nor would it help those who actually live in poverty, like homeless people, because they don’t have jobs in the first place. In fact, working people who live in poverty are usually poor not because their wages are low, but because they don’t have enough hours.
Moreover, by analyzing minimum wage hikes that have occurred in various jurisdictions around the world, it’s evident that raising the minimum wage has almost no positive effect on poverty rates. Take British Columbia for instance. In 2011, when Christy Clark raised the minimum wage from $8/hour to $10.25/hour, there was actually an increase in the provincial child poverty rate. In addition, shortly after the wage came into effect, grocery stores like Safeway and Superstore began replacing cashiers with machines. With this in mind, it’s clear that minimum wage hikes lead to labour substitution, thereby making it more difficult for young people to get work experience.
If policymakers want to truly lift people out of poverty, they can begin by growing the economy and creating more private-sector employment opportunities. This has to start by enabling businesses to grow and invest; lowering corporate tax rates, raising the earned income tax credits and allowing for more infrastructure development are good starting points. Only then can people have access to well-paying, viable jobs that come with economic growth.
The minimum wage debate has, once again, been stirred up primarily as a political talking point ahead of October’s federal election campaign. This has more to do with the unions’ public image than it does with actually helping people.
Louis Fok is a second-year student.
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