The truth about minimum wage
Raising the minimum wage will always provoke a public debate because people on the left think the MW is the most powerful tool they have to fight poverty and people on the right are opposed to any and all government interference with free markets. They are both wrong. But the provincial Liberals were right to raise the minimum wage this week to catch up with inflation. After all, if CEO's got a 27% raise in 2010 alone, why should the lowest income earners get 7% over the last four years?
Those who oppose raising the MW lean heavily on old research. For the last 25 years paper after paper and now meta studies of those papers find that raising the MW has little impact on employment. Yes, a study handed in to the Ontario government predicted "negative impact on employment". What that study's fans wont admit is that it showed the same negative impact as all the other studies which is to say "minimal" to "negligable". Employers will tell you they can't afford it but what they really can't afford is to get by on fewer employees. Fast food restaurants and coffee shops can't to slow down service or they will lose customers. Retail outlets rely on their workers to drive sales. People buy more when they are personally engaged.
The other reason raising the MW has almost no impact is because most research suggests that the rate is so low it's roughly the same as the baseline wage employers would have to pay anyway.
But when it comes to the MW debate it's helpful to consider other angles. Walmart is famous for paying minimum wage (and then denying it) and in the recent past it had a 50% annual turn over in employees. How much does it cost to interview, hire and train these employees? And if they hate their jobs that much how hard are they working to sell and upsell clients? Walmart has been on a slide in recent years and is currently being outperformed by retailers that pay well above minimum wage making it clear to their employees that they are more than a negative line item.
I said at the opening that the left is wrong about the MW as well. That's because raising it does little to lift people out of poverty. Raising the wage modestly improves the lives of those earning MW but it has never been a great tool for changing the economic outcomes of families.
What Ontario has done this week is good for labour and good for business. Workers will keep up with inflation and employers will be able to plan ahead for predictable wage increases.