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Wednesday, October 06, 2010

Minimum wage increase will hurt more than it will help

The BC government is debating raising the minimum wage. I understand that everyone wants to help the poor, and getting them higher wages seems like a good way to do it.

The problem is that it simply does not work that way. Niels Veldhuis and Amela Karabegovic explain why not:

Next, consider the claim that the minimum wage needs to be increased to raise the income of society's low-income workers. While this claim certainly appeals to the emotions, the typical minimum wage earner is not the person depicted by advocates of minimum wage hikes. Data from Statistics Canada reveal that 59 per cent of minimum wage workers are 15 to 24 years old, and most of them (93 per cent) live at home with family. Many of the remaining individuals earning minimum wages are adults supplementing their family income with part-time work during child-rearing years or after retirement.

Additionally, workers earning minimum wage are not the same people who earned the minimum wage a year or two ago, since minimum wage work is largely temporary. The vast majority of minimum wage earners quickly experience upward income mobility. Research shows that after two years, more than 80 per cent of minimum wage workers earn more than the minimum, with a typical wage gain of about 20 per cent.

Herein lies the main problem with minimum wage increases. Employers respond by reducing the number of workers they employ and/or the number of hours their employees work. Consequently, minimum wage increases take away opportunities for low-skilled workers and young people to enter the workforce, gain experience and move up the income ladder.

A fast food job is a great first job to have. It teaches you a lot of the basic skills that you will need in any work place (such as patience). If the BC government really wants to help it should eliminate the minimum wage and thus create more jobs.

Posted by Hugh MacIntyre on October 6, 2010 | Permalink


This is a disaster for business.
The majority of companies that pay minimum wage are mom and pop small
businesses that have the slimiest of profit margins. If these small businesses have to raise
wages they often are forced to raise prices of the product they sell. Often
the products these firms sell are staples and necessities, which the working
poor need to live. Since the goods sold to them are more expensive because
of the increased wage expenses of businesses the wage increase becomes

Posted by: StanleyR | 2010-10-06 5:17:20 PM

Often businesses use this wage as a training pay, which lead to permanent, gainful employment.
Market forces are the best determiners of wage levels for employees. Unskilled workers cannot compete on skill but they can on price.
It is normal that socialists and chattering classes of the poverty industry to have no concept that businesses need to make a profit to
survive. They look at small businesses as social agencies. When wages are fixed by law above market level, it must be at a point where the supply exceeds the demand. There is a technical term for that gap, called “unemployment”.

Posted by: StanleyR | 2010-10-06 5:21:57 PM

Why doesn't government instead raise the personal exemption from paying income tax to double of what it is today so minimum wage earners do not have pay any income tax? To get a raise, cut taxes! If tax freedom day is in the
middle of June, cut taxes and big government spending and tax and spend socialism. Unions campaign for minimum wage laws because they cannot compete with cheap labour and ivory tower socialists love minimum wage laws, so both these rich and powerful use government to abuse the poor.

Posted by: StanleyR | 2010-10-06 5:24:42 PM

There is ample evidence that things such as minimum wage and rent control do more harm than good, but some prefer to ignore facts and prefer "good feeling sounding" policies.

StanleyR raises excellent points with which I agree.

Posted by: Alain | 2010-10-06 8:13:46 PM

One of the most irritating practices used by persons trying to prove a point is when they provide a hard statistic for one side of the argument,then use qualifiers,such as "many" or "the vast majority" for the other side.

In the study by Veldhuis and Karabegovic,"59 per cent of minimum wage workers are 15 to 24 years old, and most of them (93 per cent) live at home with family. Many of the remaining individuals earning minimum wages are adults supplementing their family income with part-time work".

Why "many"? We were given the numbers "59%" and "93%",so don't stop there, let's have the actual number from your study,or is there a problem that it won't prove your point but may weaken it?

"The vast majority of minimum wage earners earners quickly experience upward income mobility". What constitutes a "vast majority", 51% 67% 93%?

Sloppy reporting, give us statistics or rhetoric,not a mix of the two.

Stanley R has an excellent point, increase the personal exemption,rather than increasing the minimum wage by a dollar or so,and low income earners will be far better off.

But governments love to appear to be generous as they give with one hand and take it back with the other.

Posted by: dmorris | 2010-10-10 12:11:57 PM

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