Minimum Wage Raise; What’s it Good For?

The At Issue panel on CBC this week discussed minimum wage, and the conversation was striking because of the lack of information this usually erudite panel came up with. It just goes to show that when it comes to economic theory, nobody really knows the effects of upping the minimum wage. Andrew Coyne, whose opinion I usually respect, merely stated his belief that it’s bad economic policy, and there is “lots of evidence and lots of theory to support this.” He gave precisely none of this evidence, just as he gave none in a newspaper column he wrote earlier. One of the other panel members mentioned that the base employment rate and number of jobs have been going up in tandem in Ontario recently, indicating that perhaps an increase does not kill jobs.

So, Who Is the Raise Good For?

Needless to say, it’s good for those with low-paying jobs, both those a minimum wage and those just above them, whose salaries will rise. But who else?

Well, it has to be good for Kathleen Wynne and the Ontario Liberals. They need the votes of the young, the new immigrants, the women. Growing their voter base is a possible with this legislation, especially at the expense of the NDP. So, whether it’s bad for the economy, it’s great politics.

It’s good for the statisticians, for sure. The only way to get information on one of these complicated situations is to enact it and find out what happens. As long as the right wing can keep us from trying these policies, there will never be any information to make logical decisions on, so they can continue to use emotional blackmail and non-provable claims to further their side of the argument.

The problem that the government has is deciding whether this policy will be good for the majority of its citizens.

The Business of Governing

It is the responsibility of government to strike the balance between the individual’s rights and benefits and the needs of the group being governed. Thus governing often becomes a matter of playing the odds. In many situations a government must choose to inconvenience a small number of individuals for the greater good of the population.

This is the case with the minimum wage. If you suddenly raise the base wage, a certain number of Grinches like Tim Horton’s will cut their workforce. A certain number of marginal businesses will cease operations, and their employees will be put out on the street. However, the one statistic that seems to be provable is that over the next few years the net amount of money earned by the lowest wage earners will increase. More money will flow to the poor. Which is a better result than any “trickle down” proponent can boast. And making it possible for the poor to improve their situation with money they earned on their own fits in with the ideals of many political parties.

The one point that can be made about the minimum wage is that it is at least a fair policy, spreading the pain to all employers. So if you find you have to raise your prices to pay your workers, at least you can be sure that there is the same pressure on all of your competition. If you want to be cynical, raising the minimum wage is price fixing by the government.

Taxation

Which takes us back to the political arena. If an increase in the base wage in the long run ends up being passed on to the consumer, that means it is simply a devious tax increase. Isn’t that what it’s called when the government passes a law and we all have to pay more? A Living Wage system involves the government taxing us directly and giving the money to the poor. Same idea, similar result, but harder to sell.

And another old argument I covered in an earlier post but can’t resist repeating; if you make legislation that advantages the ultra rich, who gets the advantage? The ultra rich. They are certainly not going to pay more taxes. They are just as likely to stash their money in an offshore account and buy a luxury foreign car. If you make legislation that benefits the poor, whom does it advantage? Every store in town. They spend their money right here and right now. Henry Ford, for all his faults, had one thing right. He paid his workers enough money that they could afford to buy his cars.

Bad for Business?

At the bottom line, though, I have to lump the minimum wage in with a lot of legislation passed by various governments. Carbon pricing is bad for business. Environmental controls are bad for business. Worker safety programs are bad for business (at least short term). Unions are bad for business. As numerous failing economic systems have proved, it is possible to shore up business by ignoring these policies, but in the end, the rest of the population suffers so that a few can make fortunes. The industry czars of the Industrial Revolution. Big Trusts in 1900 US. Today it’s the Oligarchs in Russia and the leaders of the Chinese Communist Party. Oh, yes, and the Republicans of the US.

Fortunately, there are few political parties that think governing is all about the economy. A good thing, or we would have more of the slimy economic reform legislation that oozed out of the US Congress recently. I don’t think there was ever a moment in the economic history of mankind where it was easier for an elite to make huge sums of money at the expense of everyone else. The only defence the common worker has against this is government intervention.

Yes, a few small businesses and marginal workers will be disadvantaged by this policy. However, in the long run the population will probably be better off. And that’s the job of government.

 

Sidebar: Tim Horton’s

In case you didn’t know, Tim Horton’s is no longer a small Canadian business run by a washed-up hockey player cashing in on his fame (Horton died in 1974). It was recently bought out by Burger King, a subsidiary of Restaurant Brands International, which is in turn owned by a Brazilian investment firm and thus joins the ranks of the huge multinationals that hire the majority of minimum wage workers in Canada.

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