The Minimum Wage Hike. Good or Bad?

 

By Brittany DaSilva

 

By October 2018, the minimum wage in Alberta will be $15 per hour. It is commendable that the NDP want to give lower-income Albertans the chance to properly support their families by increasing the minimum wage to an actual livable wage. However, this may be a temporary solution to a much more complicated issue.

 

With issues like rising inequality and higher costs of living, it seems only fair that minimum wage workers earn a decent living wage. Yet, those who oppose the proposal fear widespread job loss and economic ruin, despite the fact that there are no credible studies that substantiate these claims. History has proven that prior increases have not resulted in any significant job losses. In 2011, the BC government raised the minimum wage from $8 to $10.25 an hour – a drastic 28 per cent increase – which only resulted in a 1.6 per cent decline in employment between 2010 and 2013 for workers under the age of 25.

 

On October 1, 2016, Alberta’s minimum wage was increased from $11.20 to $12.20 per hour. On October 1, 2017, it became $13.60 per hour. Those working minimum wage jobs will continue to earn $13.60 until the government’s final increase to $15 per hour on October 1, 2018. The real question is, does any of this make a difference to low-income families or individuals?

 

According to a study by Statistics Canada, the minimum wage in Canada in 1975 averaged out to $2.60 per hour. In 2013, that average was $10.14. Shockingly, when expressed in today’s dollars, the minimum wage in 1975 was $10.13 an hour. This means that in 38 years, despite raising minimum wage from a measly $2.60 to $10.14, workers in minimum wage jobs have only gained $0.01 an hour in real purchasing power.

 

For this reason, it’s important to consider the consequences of inflation when discussing minimum wage. As defined on Investopedia, inflation is “the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.” It’s logical to assume that the minimum wage increase will immediately affect the marginal costs of at least some businesses. It is impossible to determine how many will be initially affected, but there are companies that will feel the shift from $13.60 to $15 per hour.

 

A restaurant operating too close to their breakeven point will have to increase the cost of their menu items to compensate for a minimum wage hike. Thus, this begins the inflation process. Slowly, the costs of various goods and services will rise, as companies across Canada begin to widen their profit margins. Eventually, we will be right back to square one. Years from now, Albertans earning minimum wage will be unable to support their families, as $15 an hour will no longer be a livable wage.

 

If the Canadian government really wants to support low-income families who are living on a minimum wage salary, there is much more that needs to be done. Increasing the minimum wage every few years is a temporary solution to a problem that has never gone away. Tax credits, benefits, or subsidies may prove to be better alternatives. This kind of financial assistance can more specifically target the low-income families that the government is trying to help. With minimum wage hikes, it’s only a matter of time before low-income families are struggling once again and it’s back to the drawing board for the Canadian government.