Does raising the minimum wage = job losses?

Please chip in to support rabble's election 2019 coverage. Support rabble.ca today for as little as $1 per month!

Photo: flickr/duckiemonster

You can change the conversation. Chip in to rabble's donation drive today!

Recently Ontario has decided to raise its minimum wage from $10.25 to $11, a full 16 per cent below the poverty line. While the hundreds of thousands of Ontarians who try to subsist on minimum wage are no doubt lining up to thank the benevolent Premier Wynne for inching them that much closer to actually being able to arise from abject poverty through full-time employment, the praise has not been unanimous.  

The Ontario PCs, the Canadian Federation of Independent Business (CFIB) and the usual suspects for the 1% have been wringing their hands and wailing about how terrible the notion of increasing the minimum wage by $0.75 is. The CFIB claims that increasing the minimum wage hurts minimum wage workers "by reducing the businesses' capacity to hire and retain them." In fact, the CFIB predicts that a 10 per cent increase in the minimum wage would trigger up to 321,000 job losses.

So is this, in fact, true? Does increasing the minimum wage = job losses?

Happily, Ontario has some recent history to rely on in answering this question. The province raised the minimum wage four times between 2007 and 2010, from $7.75 to $10.25 an hour. According to the foes of minimum wage increases, there should have been job losses every year as a result. But in fact, year-to-year unemployment rates stayed the same or decreased in Ontario in each of those years with the exception of 2009, the year of the economic downturn. 

A better example might be Québec, which raised its minimum wage for nine consecutive years between 2005 and 2013, increasing the rate from $7.45 to $10.15 during that period. Out of those nine years, unemployment increased just once -- again in 2009.

How about the booming Wild West provinces of unfettered capitalism: Alberta and Saskatchewan? Alberta's minimum wage went from $8 in 2007 to $9.95 in 2013. In all those years, unemployment either went down or remained steady with the exception of 2009. During the same 2007 to 2013 period, Saskatchewan's minimum wage rose from $7.55 to $10 an hour while its unemployment rate only increased once, in (you guessed it!) 2009.

Meanwhile, B.C. broke its multi-year freeze on minimum wage, increasing it from $8 in 2011 to $10.25 in 2012. Surely this shocking 26 per cent increase in the minimum wage over such a short period of time broke the backs of businesses with minimum wage jobs and sent British Columbians to the EI and bread lines. In reality, unemployment decreased by nearly a full percentage point.

Another way to look at the data would be to line up the provinces according to minimum wage rates and compare their unemployment levels. If the cheerleaders of the free market are correct about the devastating effects of minimum wage increases on jobs, one would expect to find the highest unemployment in provinces with the highest minimum wages. But out of the four provinces with above-average minimum wage rates in 2012, only one had higher-than-average unemployment (Nova Scotia). Conversely, just two of the five provinces with below-average minimum wage rates in 2012 also had below-average unemployment rates for that year (Alberta and Saskatchewan).

There are two possible explanations here:

1. The minimum wage rate has much less of an impact on job numbers than other economic factors like a booming resource sector or a collapsing manufacturing sector or global economic downturn (in which case, the argument that minimum wages increases = job losses must be cast aside).

2. Increasing the minimum wage actually has a positive effect on job creation. This may seem counter-intuitive, but consider this: people earning a higher minimum wage are more likely to spend more of their money than they save because they're less stretched to meet their basic needs. That increase in spending gets plugged into the local economy. Also, consider the kinds of jobs that make up the majority of the minimum-wage sector: service and retail. You can't really pack up most of those jobs and move to a region with lower minimum wages like you could with a manufacturing plant, for example.  

Regardless of the explanation, the numbers are clear: increasing the minimum wage does not increase the unemployment rate. Anyone claiming otherwise appears to be misinformed or lying.  

 

Like this article? Chip in to keep stories like these coming! 

Todd Ferguson used to work full-time for $5.50 an hour.

Photo: flickr/duckiemonster

Further Reading

Thank you for reading this story…

More people are reading rabble.ca than ever and unlike many news organizations, we have never put up a paywall – at rabble we’ve always believed in making our reporting and analysis free to all, while striving to make it sustainable as well. Media isn’t free to produce. rabble’s total budget is likely less than what big corporate media spend on photocopying (we kid you not!) and we do not have any major foundation, sponsor or angel investor. Our main supporters are people and organizations -- like you. This is why we need your help. You are what keep us sustainable.

rabble.ca has staked its existence on you. We live or die on community support -- your support! We get hundreds of thousands of visitors and we believe in them. We believe in you. We believe people will put in what they can for the greater good. We call that sustainable.

So what is the easy answer for us? Depend on a community of visitors who care passionately about media that amplifies the voices of people struggling for change and justice. It really is that simple. When the people who visit rabble care enough to contribute a bit then it works for everyone.

And so we’re asking you if you could make a donation, right now, to help us carry forward on our mission. Make a donation today.

Comments

We welcome your comments! rabble.ca embraces a pro-human rights, pro-feminist, anti-racist, queer-positive, anti-imperialist and pro-labour stance, and encourages discussions which develop progressive thought. Our full comment policy can be found here. Learn more about Disqus on rabble.ca and your privacy here. Please keep in mind:

Do

  • Tell the truth and avoid rumours.
  • Add context and background.
  • Report typos and logical fallacies.
  • Be respectful.
  • Respect copyright - link to articles.
  • Stay focused. Bring in-depth commentary to our discussion forum, babble.

Don't

  • Use oppressive/offensive language.
  • Libel or defame.
  • Bully or troll.
  • Post spam.
  • Engage trolls. Flag suspect activity instead.