Five myths to bust about minimum wage hikes

I wrote a piece on the very recent proposal to increase the minimum wage in British Columbia that was published over the weekend in The Tyee:

The B.C. Federation of Labour has just proposed to increase the minimum wage in British Columbia to $13 per hour. In short, it’s about time. With this proposal, B.C. joins the minimum wage debate that has erupted across North America. The debate is much needed: poverty wages have no place in today’s economy.

In the United States, the lowest-paid, most precarious workers stood up and demanded a higher minimum wage at great personal risk, and politicians have slowly started to heed their call. President Obama recently agreed to raise the minimum wage for federal contractors from $7.25 to $10.10, a 39 per cent increase — notably larger than the 27 per cent increase proposed by the B.C. Federation of Labour.

Seattle and other American cities are seriously considering the $15 minimum wage proposed by striking fast-food workers. Ontario, too, has announced plans to raise its minimum wage to $11 and index it annually to inflation; however, groups there have called for a more substantial increase that brings someone working full time at the minimum wage above the poverty line.

Here in B.C., someone working full-time, year-round on the minimum wage also falls far below the poverty line, especially in urban areas. A salary based on working 35 hours per week and 50 weeks per year at the minimum wage is almost $18,000, over $5,500 short of the Canada-wide low income cut-off for large cities and still over $2,000 short in medium-sized towns. Add in a dependant and the minimum wage becomes even more of a poverty wage. The comparisons to a living wage are even starker: a living wage is $19.62 in Metro Vancouver and $16.37 in the Fraser Valley. Looking at the data, we see that the real minimum wage in B.C. has stagnated for the past three decades, at the same time as labour productivity and GDP per capita have been steadily rising.

Figure 1. BC's minimum wage vs. productivity and real GDP per capita (Source: Statistics Canada, BC Stats and the Minimum Wage Database).
Figure 1. BC’s minimum wage vs. productivity and real GDP per capita (Source: Statistics Canada, BC Stats and the Minimum Wage Database).

Another useful measure is the proportion of the minimum wage to the average wage. A recent report from the Canadian Centre for Policy Alternatives recommended a minimum wage at 60 per cent of the average wage as a good target, citing the experiences and policy goals of other developed countries. For comparison, the proposed $13 minimum wage is less than 53 per cent of the current average wage, while the current minimum wage has just recently clawed its way back above 40 per cent of the average from lows around 35 per cent.

Figure 2. BC's minimum wage compared to the average wage (Source: Statistics Canada and the Minimum Wage Database).
Figure 2. BC’s minimum wage compared to the average wage (Source: Statistics Canada and the Minimum Wage Database).

Despite the increasingly universal and continent-wide calls for increasing the minimum wage and a demonstrated need for a raise in our local context, raising the minimum wage remains a controversial issue. Over the coming days and weeks, we’ll hear many of the same tired arguments. For each one of these arguments there is a mounting pile of contrary evidence from across the continent. We should not be so vain as to think that this evidence wouldn’t apply to B.C…

In what follows, I answer five myths about the minimum wage: that it kills jobs, that it doesn’t decrease poverty, that it is the purview of rich teenagers, that there are better anti-poverty tools and that economists do not support a raise. Read the rest here.

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