Amid much debate, the U.S. federal minimum wage rose Friday from $6.55 to $7.25 an hour. While some critics argue that with the country mired in recession and plagued by high unemployment rates, now is not the time for an increase. Others say low wage earners spend all they make and that extra spending will give the economy a much needed boost.
The Economic Policy Institute, a nonprofit Washington D.C. think tank created in 1986 to broaden the discussion about economic policy to include the interests of low- and middle-income workers, estimates that about 4.5 million employees, less than 4 percent of the labor force, will see a bump in their hourly wages. But not all of those affected will actually be minimum wage earners. Businesses trying to preserve their wage structures will probably increase the wages of their employees earning slightly above the minimum.
In doing so, employers (especially publicly traded corporations) will cry that wage increases will cut into their profits, forcing them to increase their prices and lay off workers. The problem with that argument is that employers complain about increases to minimum wage whether we’re in the midst of an economic boom or a global financial crisis.
Publicly traded corporations are shareholder driven enterprises, whose primary responsibility is to minimize costs. Translation: pay your employees as little as possible while working them to death. Voluntarily increasing wages so that people earn a living wage for their efforts (that’s a novel idea) runs the risk of “offending” shareholders, who only care about one thing: the size of their quarterly dividend cheques.
That explains why in the U.S. and Canada, the most profitable corporations pay their frontline staff minimum wage and use every tactic at their disposal to stay non-union, while lobbying against minimum wage increases. As far as they’re concerned, it’s never a good time to increase the minimum wage. Now they’re using the recession as an excuse to keep minimum wage as low as possible. In boom times, they’ll still oppose minimum wage increases.
Small business owners, on the other hand, have no obligations to shareholders and can pay their employees a living wage without worrying about what the public thinks.
In Ontario, where the minimum wage is $9.50 an hour, big business is already lobbying the McGuinty government to cancel the scheduled increase to $10.25 an hour at the end of March next year because of the recession.
But the Canadian Centre for Policy Alternatives (CCPA) in 2007 said “Raising the minimum wage to $10 an hour would mean a single person working full-time, all year round, could earn enough to live just above the most current (2005) poverty line. And indexing the minimum wage to inflation would put an end to pay cuts by inflation for our lowest-paid workers.” A study by the CCPA also concluded that increases to minimum wage have little effect on employment rates.
Here in Canada, according to the CCPA, one in 25 Canadians works for minimum wage or less. “But thousands of others work for only a little more. One in five Canadians earn less than $10 an hour, and nearly half of them are over 25.”
That dispels the myth that all low wage earners are young, students, working part-time and living at home with their parents. Some are men and women trying to support their families, while others are older workers looking to supplement their pension.
With a recession that’s seen thousands of workers replace well-paying jobs with ones at or near minimum wage, now seems like a perfect time to accelerate minimum wage rate increases.