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 Nanaimo city councillor and long-time anti-poverty advocate said bring it on. He said an additional four or five dollars may not seem like much, but when you are only making $10 or $11, it 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 (below) is conscious of that possibility, but thinks it may be overstated.
“If you look at different places where they’ve done it, it hasn’t put people out of business,” he said.
Research is available to back that up.
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 – a review of multiple studies conducted in the past 15 years — found that rather than laying off employees, most firms release the pressure caused by the wage increase through other avenues. These include: cutting employee hours, or benefits; cutting the wages of more highly-paid workers; finding production efficiencies; reduced staff turnover; and raising prices.
But the research is hardly unanimous.
A similar survey of pre-existing research released 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 in the short run, minimum wage increases both help some families get out of poverty, and make it more likely that previously non-poor families may 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 their 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. “I wouldn’t say it’s out of the question it could mean layoffs.”
Other possible impacts could include higher costs being passed on to the general public, a freeze on hiring, and/or higher demands being placed on existing staff.
“It will impact decision-making. They won’t just hire two people. It could mean one,” Byrne said. “It will be more of a cumulative impact.”
Ultimately, most believe a minimum wage increase simply redistributes who benefits from the existing income stream.
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 that 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. “Rather, an increase in the minimum wage would seem to be associated with a decrease in employment among teenagers, who are most likely to be paid at this hourly rate.”
Fuller said an increasing number of seniors are gravitating to those jobs, but he feels what is not getting enough attention is the number of minimum wage jobs that aren’t full-time.
“It’s not just the minimum wage, it’s the part-time aspect,” he said. “Most of the jobs out there are part-time jobs. There are people who are trying to get two or three jobs in order to survive.”
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, and it’s not good enough that this generation will actually be worse off than their parents when it comes to affordability and opportunity.”
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 — currently the lowest in the country — up to $11.25 by next fall. Premier Christy Clark said that would give B.C. the third highest rate in Canada.
Parksville Qualicum MLA Michelle Stilwell (left), who is also B.C.’s Minister of Social Development and Social Innovation, believes a $15 minimum wage is counter-productive. She said you can’t force businesses to pay high wages to unskilled labour and expect them to thrive.
For her, the minimum wage is about creating entry-level job opportunities that allow young workers and others a chance to gain the skills and experience that can help them graduate to better-paying, career-oriented employment.
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.
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