THE REAL COST OF MINIMUM WAGE: What do the economists say?

"Amazing that the sun still comes up in the east, and it still sets in the west."

That is what economist Jim Stanford has to say about a recent minimum wage increase in Australia.

In NEWSTALK 1010's special series "The Real Cost of Minimum Wage", we have heard from business owners who are raising red flags about the increase, and employees who struggle to make ends meet with their current paycheque.

For months, we have heard premier Kathleen Wynne's explanations for why her government is moving in this direction.

"There's a narrative among people who aren't able to look after their families, and are holding down two or three jobs to hold things together," premier Wynne has said.

But what do the experts say?

 


 

"There have been hundreds, thousands, of studies that have looked at the numbers," says Stanford, a Canadian economist who currently lives in Australia, where their minimum wage went up earlier this summer.

There was also a recent increase in Seattle that has been studied closely by American researchers. One study by the University of Washington says increased wages in Seattle led to cut hours and job losses, another one from the University of California found there was no detectable effect on employment in that same city.

Stanford says you can pick out individual studies here and there, but he likes to look at the bigger picture.

"In 90 per cent of the cases, there was no impact on employment, in a handful of cases there seemed to be a negative correlation, and in a handful of cases there seemed to be a positive correlation," he says.

About 50 economic experts from across Canada agree with the premier that this is a good move, signing a letter in July saying it makes "good economic sense."

CTV News

Stanford says policy changes always lead to some winners and losers. While the wage increase will be a challenge to some mom and pop shops, he argues most minimum wage workers are employed by large businesses and so we won't see job losses on a large scale. Instead, he says there will be people will more money in their pockets, and when they spend it, that can generate the demand that supports job creation.

"In fact, this measure in Ontario could actually strengthen employment, rather than the doomsday scenario that you're hearing from some of the business critics."

Stanford also points out that while businesses complain today about a wage hike they say is coming too quickly, they had no problem with a wage freeze that lasted almost a decade under former premier Mike Harris.

"I think it's a bit precious for them to say, 'Yes, we've benefited from poverty-level minimum wages for years. We don't object to raising them, just do it more slowly.' I think we've missed the chance for that," Stanford says.

Ontario Legislature

Labour minister Kevin Flynn says while his government will look for ways to help small businesses through the transition, the minimum wage increase is coming.

"We think there's a little bit of fearmongering going on," Flynn says. "We understand the fear. When you make these types of changes, people obviously have concerns, they have questions and they look to the future with some trepidation."

ACORN Canada

But activist Donna Borden, who works with the anti-poverty group ACORN, says the reality for so many low-income workers is so bleak, this change is long overdue.

"Kids are going to school hungry because their parents are working poor," she says. "They're just not making enough money. It's terrible that someone can go to work and just not make enough to survive."