Saturday, July 01, 2017

Increasing Ontario's minimum wages - the sky won't fall

Ontario's Liberal government has taken a lot of flak - mainly from what is usually described as the "business community", as though that were some collection of entirely like-minded individuals, united in their views and outlook, although I have a suspicion that it is really a shorthand or euphemism for conservatives - over their intention to raise the province's legal minimum wage from the current $11.40 an hour to $14 an hour in January 2018 and to then $15 an hour in January 2019. Coupled with this is legislation to ensure protections for casual employees whose shifts are cancelled with less than 48 hours notice, and a plan to increase the minimum amount of vacation days for employees of five years standing to three weeks. This all sounds to me like eminently laudable relief for some of the most vulnerable and oppressed members of society, ones without whom the cushy lives we live would collapse around us.
But the "business community" is not happy. They say that such a move would put many of them out of business, and I suppose that is possible in a very small percentage of cases (in which case a devil's advocate might argue that maybe they should not be in those businesses anyway if they rely on the exploitation and oppression of poor people).
Anyway, it was comforting to read in yesterday's paper an article by a group of economists (yes, members of the "business community"), which argues that the best modern studies available unanimously show that increases in the minimum wage (even quite substantial ones like this one) do not actually lead to job losses and higher consumer prices. In short, the sky will not fall if we offer some relief to the lowest of the low, and their lives will improve and they will become fully-functioning members of society and effective contributors to the very economy the "business community" wants to protect.
The idea that a higher minimum wage leads to increased unemployment, and is a well-meaning but ultimately self-defeating strategy which will only hurt the very workers it is supposed to help, is an old and ingrained belief, apparently still ardently espoused by the "business community". However, it has been superseded in the last generation or so by a revised economic model that does not make the rather simplistic and outdated assumptions of perfectly competitive markets. A whole slew of Nobel laureates and professional economists are now apparently in agreement that, in the real world, higher minimum wages do not automatically result in job losses and economic chaos, and often even create more employment.
Furthermore, empirical studies in the US, Canada and Britain all confirm that higher minimum wages do in fact succeed in lifting incomes for low-paid workers and thereby help to reduce income inequality. More motivated employees, lower staff turnover and lower recruitment costs all help small businesses flourish in such a scenario. Meanwhile, the spending power of low-income workers increases, and the economy as a whole benefits. It is a win-win-win situation.

The dire warnings of impending doom in the media have continued, largely from businesses, business advisory organizations, right-wing think-tanks, etc, with only the very occasional opposing viewpoint expressed by an economics professor, pointing out that these predictions are based on selective, often outdated, theoretical studies.
One such dissenting article points out another aspect of the argument that I (and most other pro-business reports I have read on the subject) had failed to take into account. Professor Jim Stanford points out that, even if the small-business lobby is correct and the increase in the minimum wage does result in many businesses investing in more automation or just shedding bottom-end jobs (which he seriously doubts), any employment impact that might result would still be lost in the current climate of increasing employment in all three of the provinces that are currently pursuing the $15-an-hour minimum wage.
Ontario, British Columbia and even post-oil shock Alberta are all expanding their workforces apace at the moment as their economies are booming. So, even if the wage increase does result in some layoffs, these would be lost among the underlying job expansion. The rate of job increases may (or may not) slow down, but the increases would continue. In fact, for this very reason, now would be a great time to pursue a socially and economically equalizing minimum wage increase.

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