Progressive Economics Forum
August 29th, 2012
Saskatchewan Federation of Labour president Larry Hubich and I have the following joint op-ed in today’s Regina Leader-Post (page A10).
It’s been fourteen years since I first wrote into The Leader-Post advocating a minimum-wage increase.
Why higher wages make economic sense
Recent Saskatchewan government news releases trumpet record numbers for wholesale trade, building permits and exports. But as Labour Day approaches, we should consider that many Saskatchewan workers do not share in the prosperity they create.
In particular, our province will soon have the embarrassing distinction of Canada’s lowest minimum wage. On September 1, Alberta’s hourly minimum will rise to $9.75, leaving Saskatchewan in last place at $9.50.
Our province should instead aspire to lead the nation with Canada’s best minimum wage. Specifically, we propose phasing in a minimum wage of $11.00, which would match Nunavut as the highest of any province or territory. The government should then index this amount to inflation to help protect low-income earners from having their buying power eroded over time by Saskatchewan’s rising cost of living.
Some of the benefits of a fair minimum wage are obvious. It means more much-needed income in the hands of low-paid working people. Increasing the wages of workers at the lowest end of the income spectrum would also add to consumer spending in the province, helping local businesses and other participants in the economy.
More than any other group, low-income earners spend their money in their communities. For example, they are far less likely to make foreign investments or to travel abroad. Increasing Saskatchewan’s minimum wage would bolster the provincial economy.
Of course, opponents of a higher minimum wage argue that it would reduce employment. Ironically, the same conservative politicians and business lobbyists who characterize employment as being vulnerable to any improvement in the minimum wage often brag about the strength of Saskatchewan’s job market and complain about “labour shortages.” Better wages would help encourage more people to enter the workforce.
Claims that minimum wages reduce employment have no empirical support. Economics professors from the universities of Massachusetts (Amherst), North Carolina (Chapel Hill) and California (Berkeley) recently compared adjacent U.S. counties along the borders of states with different minimum wages.
Their conclusion was published in the November 2010 edition of The Review of Economics and Statistics: “For cross-state contiguous counties, we find strong earnings effects and no employment effects of minimum wage increases.” In other words, boosting the minimum wage succeeded in raising pay without reducing employment, even when neighbouring jurisdictions maintained a lower minimum.
We know from our own province’s history that there is no contradiction between a strong minimum wage and a strong job market. During Allan Blakeney’s premiership, Saskatchewan enjoyed Canada’s highest minimum wage and lowest unemployment rate.
But even if raising the minimum wage reduced employers’ demand for labour, it would still benefit employees. The vast majority of minimum-wage work is in areas like fast food and retail, which have variable shifts and hours. If these employers want less labour, they cut back hours rather than laying off workers.
We propose to phase in a 16% increase in Saskatchewan’s minimum wage. In reality, a fast food restaurant would likely require the same amount of labour since it could not substitute robots or other capital equipment for workers.
But for argument’s sake, imagine that the restaurant responded by cutting paid hours by 16%. Its employees would still earn the same total income as before and gain more free time, with the wage increase offsetting the decrease in hours worked.
Opponents of a higher minimum wage cannot get away with simply suggesting that it might somehow slightly reduce demand for labour at the margin. They would have to prove that paid hours would fall by a larger percentage than the increase in wages. And that is not what the evidence indicates.
While bragging about the relative strength of Saskatchewan’s labour market, the government is allowing every other Canadian province and territory to surpass our minimum wage. Restoring Saskatchewan to a position of leadership would benefit those workers who most need a raise and strengthen the wider provincial economy.
August 29th, 2012
Saskatchewan Federation of Labour president Larry Hubich and I have the following joint op-ed in today’s Regina Leader-Post (page A10).It’s been fourteen years since I first wrote into The Leader-Post advocating a minimum-wage increase.
Why higher wages make economic sense
Recent Saskatchewan government news releases trumpet record numbers for wholesale trade, building permits and exports. But as Labour Day approaches, we should consider that many Saskatchewan workers do not share in the prosperity they create.
In particular, our province will soon have the embarrassing distinction of Canada’s lowest minimum wage. On September 1, Alberta’s hourly minimum will rise to $9.75, leaving Saskatchewan in last place at $9.50.
Our province should instead aspire to lead the nation with Canada’s best minimum wage. Specifically, we propose phasing in a minimum wage of $11.00, which would match Nunavut as the highest of any province or territory. The government should then index this amount to inflation to help protect low-income earners from having their buying power eroded over time by Saskatchewan’s rising cost of living.
Some of the benefits of a fair minimum wage are obvious. It means more much-needed income in the hands of low-paid working people. Increasing the wages of workers at the lowest end of the income spectrum would also add to consumer spending in the province, helping local businesses and other participants in the economy.
More than any other group, low-income earners spend their money in their communities. For example, they are far less likely to make foreign investments or to travel abroad. Increasing Saskatchewan’s minimum wage would bolster the provincial economy.
Of course, opponents of a higher minimum wage argue that it would reduce employment. Ironically, the same conservative politicians and business lobbyists who characterize employment as being vulnerable to any improvement in the minimum wage often brag about the strength of Saskatchewan’s job market and complain about “labour shortages.” Better wages would help encourage more people to enter the workforce.
Claims that minimum wages reduce employment have no empirical support. Economics professors from the universities of Massachusetts (Amherst), North Carolina (Chapel Hill) and California (Berkeley) recently compared adjacent U.S. counties along the borders of states with different minimum wages.
Their conclusion was published in the November 2010 edition of The Review of Economics and Statistics: “For cross-state contiguous counties, we find strong earnings effects and no employment effects of minimum wage increases.” In other words, boosting the minimum wage succeeded in raising pay without reducing employment, even when neighbouring jurisdictions maintained a lower minimum.
We know from our own province’s history that there is no contradiction between a strong minimum wage and a strong job market. During Allan Blakeney’s premiership, Saskatchewan enjoyed Canada’s highest minimum wage and lowest unemployment rate.
But even if raising the minimum wage reduced employers’ demand for labour, it would still benefit employees. The vast majority of minimum-wage work is in areas like fast food and retail, which have variable shifts and hours. If these employers want less labour, they cut back hours rather than laying off workers.
We propose to phase in a 16% increase in Saskatchewan’s minimum wage. In reality, a fast food restaurant would likely require the same amount of labour since it could not substitute robots or other capital equipment for workers.
But for argument’s sake, imagine that the restaurant responded by cutting paid hours by 16%. Its employees would still earn the same total income as before and gain more free time, with the wage increase offsetting the decrease in hours worked.
Opponents of a higher minimum wage cannot get away with simply suggesting that it might somehow slightly reduce demand for labour at the margin. They would have to prove that paid hours would fall by a larger percentage than the increase in wages. And that is not what the evidence indicates.
While bragging about the relative strength of Saskatchewan’s labour market, the government is allowing every other Canadian province and territory to surpass our minimum wage. Restoring Saskatchewan to a position of leadership would benefit those workers who most need a raise and strengthen the wider provincial economy.
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