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Minimum Wage Reality 
Posted (2017-07-24)

David,

The following is intended to be analytical and certainly not personal. Attached is one of many empirical studies that does not support your ideologically driven views on minimum wages. And its focus is on northern Ontario. It was "fake news" for you to assert that the preponderance of economic studies support your thesis. It simply is not true, and if you don't know it then you have not done your homework.

Let me repeat something that I have said to you several times before.Economics is complex - it's not easy. Most university students who start out studying it fall by the wayside because they cannot handle the rigour.

If you increase minimum wages there are a plethora of interactions and effects - short term/ long term, industry type, regional profile, winners/ losers, demography, employment legislation, technology, capital markets and availability, among many others. Redressing one set of inequities causes others.

Economists learned long ago that you cannot address/ solve any particular issue in isolation. If you try to do so it's like whack-a-mole. As you hammer down one problem another or more pop up. That's why economic policy advisors use complex, interactive, data driven econometric models. Not only are these models domestic in nature but they must also factor in things like free trade agreements, third world competition, trade barriers, subsidization etc etc.

The bottom line is that if you did that kind of analysis it is highly unlikely that it would confirm that a 35% increase in minimum wage over a year would support your theory which you wrongly assert as fact. But it's good politics for a floundering government that is trying to bury a clueless NDP party in Ontario.

One other note. Living wage analysis is informative in developing social policy but should never be used as the basis of economic policy unless we aspire to third world status.

http://www.northernpolicy.ca/upload/documents/publications/commentaries/npi_ minimumwages-gunderson_july2014_en.pdf

Trent


Trent,

Thanks for passing along this study. If only 3% of minimum wage workers are between 25-64 years of age in Canada, I would be shocked.  

I stand committed to a $15 minimum wage for Ontario, even after reading this cover-to-cover.

Stan Didzbalis


In fact, the percent of Ontario workers making minimum wage was 9% in 2012 (https://www.labour.gov.on.ca/english/es/pubs/mwap/section_02.php).

The latest figure I've seen is 11.6% for 2016 (http://www.progressive-economics.ca/2016/05/25/who-earns-minimum-wage/).

Those earning less than $15/hr (still a poverty wage) in 2016 make up 28.6% of the workforce.

The author of the NPI study Trent circulated is using old (2003) labour stats. The job landscape has changed dramatically since China entered the WTO (2004, I believe) and the Great Recession hit in 2008.

In 2012 the majority of workers making minimum wage in Ontario were aged 20-64 (55.3% of min wage earners - higher now, see below); 42.1% were teens.

The Cdn Chamber of Commerce notes that (in 2013) women 55 years and up made up the largest increase of all demographic groups. Some might be late boomers hitting that age, but not all. That likely means older women are re-entering the work force, perhaps to take up slack in their household incomes.

The Canadian Chamber also notes that while all net new jobs in 2012 were full time, 95% of net new jobs in 2013 were part time. That trend (except for May 2017) has continued. (http://www.chamber.ca/media/blog/140227-Canadas-Labour-Market-Sputtered-in-2013/140227_Canadas_Labour_Market_Sputtered_in_2013.pdf)

The author of the NPI study asserts that raising the minimum wage does not reduce poverty. Surely this is due to the fact that the minimum wage is a poverty wage. Even at $15 an hour it will be a poverty wage.

The living wage for Grey Bruce in 2017, as calculated by the United Way of Bruce Grey, is $22.01. (http://unitedwayofbrucegrey.com/bruce-grey-living-wage-2017/)

The NPI report rests on the assumption that teens living at home are skewing both statistics and policy. But most of the studies he quotes are from the 1990s or early 2000s -- many of them his own. He asserts that raising the minimum wage can have the adverse effect of reducing the demand for workers -- ie, causing higher unemployment. He does this without much evidence and a lot of speculation.

So, Trent ...

I'll see your NPI study and your Washington U study, with initial studies on the impact of raising the minimum wage in Alberta and Seattle, which show that (so far) there is no significant increase in unemployment from raising the minimum wage and only a minimal increase in prices in the region. And I'll raise you 7 decades of research summarized by the National Employment Law Project (attached). And I'll throw in the endorsement of 53 university-based economists in Ontario who say "The stereotype of the teenager living at home making minimum wage is out of date: over 60% of workers earning minimum wage in Ontario in 2015 were over the age of 20, as were over 80% of those making $15 or less." (http://www.progressive-economics.ca/2017/06/29/economists-support-15-minimum-wage-in-ontario/).

I'm not sure I need to be lectured on the complexity of social issues. My degree is in psychology & sociology and I'm well aware of unintended consequences although I'm not sure I'd turn them into a law. In fact I'm skeptical of the whole notion of 'laws' in the social sciences and that includes the dismal one.

As for my position being "ideologically driven", I will as Chief Ralph Akiwenzie would say, "I categorically deny those allegations. And I'm not too crazy about the alligators either."

I think you must agree that the paper I wrote a couple of years ago on the consequences of precarious work was not ideologically driven. (You endorsed it publicly after all). We agree on the problem, we perhaps disagree on the solution.

Perceptions to the contrary, I don't much like the solution of raising the minimum wage. It is a blunt instrument and it will prove a hardship for some small businesses.

I would much rather see low wages and the inequality they breed solved by the private sector by companies paying a fair (ie, living wage) for a fair day's work. But that doesn't seem to be happening -- quite the opposite in fact. (I noticed that this wasn't one of the solutions recommended by the author of the study you sent around -- perhaps he has his own ideological issues.)

If business isn't going to step up, then I'd rather see government remove the fetters they've put on unions. Surely, a collective agreement hammered out between employers and workers that addresses the specific problems in a workplace is better than across-the-board, Province-wide workplace reform.

Among other things, it's going to take a huge increase in bureaucracy and red tape to monitor and enforce the reforms in Bill 148. But freeing unions and making it easier to organize franchises (the biggest source of unfair wages) are not part of Bill 148, so that doesn't seem to be happening. (I noticed that this wasn't one of the solutions recommended by the author of the NPI study either.)

What's left? Tax reform I suppose. But, as the Poverty TF in Bruce Grey has found, many (most?) people in low wage jobs don't file tax returns. Besides that's money that comes at the end of the year in a lump sum. They need it now and throughout the year.

That leaves increasing the minimum wage.

Regards


David McLaren

Email: [email protected]

Twitter: @JDavidMcLaren

Web: https://jdavidmclaren.wordpress.com/


Thanks David. Let's agree to disagree.

I recommend to you the release put out by Magna last week detailing the damage that Wynne's labour market initiatives - not so much minimum wage - threatens to do to their competitive position and to continuing to be a large employer in Ontario You can believe it as you so choose. I do.

Toyota just announced it is moving hundreds of Ontario jobs to Mexico and GM is poised to discontinue any assembly in Oshawa. Also I am aware of several other current significant non automotive disinvestments that are being considered.

Trent


I agree. Let's disagree.

I'm not surprised to hear you say auto makers are headed for Mexico. That exodus started long ago with Magna leading the pack. I'd be surprised if a raise in the minimum wage has much to do with their exodus because most of their workers are earning way above $15 an hr and their collective agreements have much better benefits than Bill 148 contains.  I suspect it has more to do with high energy costs here in Ontario, super cheap labour in MX (without the hassle of dealing with unions), and Mexico's easy access to year-round shipping to both North and South America.

So those jobs were doomed, I think, before the Liberals' workplace review panel even reported. Both the Globe & the CBC had good pieces on the exodus back in 2015. https://www.theglobeandmail.com/report-on-business/international-business/latin-american-business/mexico-feature/article22987307/ // http://www.cbc.ca/news/business/carmakers-say-adios-to-canada-as-mexico-shifts-into-higher-gear-1.3108148

 

Regards

David McLaren

Email: [email protected]

Twitter: @JDavidMcLaren

Web: https://jdavidmclaren.wordpress.com/


David, Trent,

Let me add this to the mix:

In our region, we have several large employers (Chapman's, Transcontinental RBW) that pay just above the current minimum wage.  What will be the impact on those businesses?  Chapman's can likely absorb it through price increases, but Transcontinental, employing 500 people here might be a different story.

Then someone recently illustrated a company like Hobart, which employs 100+ in Owen Sound.  Their current wage rate is about $15-17 I was told.  Will their workers demand a significant raise once minimum raised to $15, and will the Illinois parent shut down this plant if they are faced with a 20% or more labour cost increase that is potentially the snowball effect of minimum wage hike?   Complicated, complicated!

Stan Didzbalis

Thanks Stan. Typically these adjustments occur with a lag - but they do occur. That's why employment/ jobs/ inflation impacts look more positive/ acceptable in the short term but morph into being more damaging in the medium to longer term than they appear to be

In the short term. And empirically it's hard to isolate exact effects of minimum wage increase from the "noise" of other concurrent changes - like the other Wynne labour market policy changes which exacerbate the pure minimum wage effects. As I said it's complex to get right but that's what economic policy advisors try to do. 😊

Trent


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