Is this the best they can do? The weak case against $14 in Ontario

Today the libertarian Montreal Economic Institute think tank released a short report claiming that Ontario’s $14 minimum wage is costing thousands of young workers their jobs and raising prices for everyone else. These overblown claims, based on skewed and cherry-picked data, came out—purely coincidentally to be sure—on the same day that Doug Ford’s Conservatives were set to enact Bill 47, the law that will cancel the planned increase in Ontario’s minimum wage to $15 on January 1, 2019 and reserve many other gains for Ontario workers such as two paid sick days.

The MEI study makes three main points, (1) that Ontario’s $14 minimum wage has caused 56,000 youth jobs to be lost so far, (2) that it has raised prices at restaurants by 5.6% and (3) that it is ineffective at fighting poverty. (Although it is irresponsible to call what MEI released a study; it is essentially a 2-page brief with an appendix mostly comprised of a very selective bibliography.)

Each is a claim is highly problematic, based either on cherry-picked data, a misreading of the research or both. Let’s take a look at each in turn.

First, the MEI claims that employment for 15- to 24-year olds in Ontario fell by 56,000 since the introduction of the $14 minimum wage. Looking at the data, however, it’s plain that there has been a big increase in youth employment volatility and it’s much less clear what the ultimate impact on youth employment itself has been. The MEI essentially cherry-picked a difference between the highest (November 2017) and one of the lowest (October 2018) volatile monthly points to get the largest possible estimate of jobs lost.

To see how volatile the data is, let’s pick a couple other month pairs. Between November 2017 and March 2018, the change in 15- to 24-year old employment is zero. That’s between the date Bill 148 was announced and after one quarter of it being in effect! Between July 2017 and July 2018 there was a gain of 22,400 jobs for 15- to 24-year olds. In fact, looking at these year-over-year changes in employment, the more stable average year-over-year change in youth employment in the ten months between January and October 2018 has in fact been a 16,900 job gain.[1]

Meanwhile, the employment rate for 15- to 64-year olds, which is much less volatile and comprises a much larger number of workers, is nearly identical today to November 2017, unchanged since Bill 148 was enacted. This represents a year-over-year gain of 82,800 jobs.

Looking more broadly at the first three quarters or nine months of 2018 so far, employment in Ontario has been up 1.7% on average year-over-year, higher than the rest of the country at 1.4% on average. In six of the nine months so far in 2018, Ontario’s unemployment rate was over 0.5% lower than in had been a year previous.

Not only has Ontario’s jobs performance kept up with or outpaced Canada-wide trends, it has been disproportionately strong in low-wage sectors—those where you would most expect to see negative effects from a higher minimum wage. September’s year-over-year employment growth in each of the three service sectors where low wage work is most common beat Canada-wide figures by around 0.5%. At the same time, earnings for low-wage workers have seen a big boost. Total wages in accommodation and food services, the most low-wage-heavy sector of the economy, were 14% higher in September than they were one year earlier, increasing at double the Canada-wide rate. Little sign of existing or impending labour market doom.

Next, the MEI cherry picks price data to fear-monger about out-of-control price increases. While Ontario’s restaurant prices did jump somewhat right after the minimum wage increase, overall inflation is in line with the rest of Canada. In fact, Ontario’s CPI is 2.2% higher than it was a year ago, exactly the same as  Canadian CPI. In a meaningful, general sense, prices in Ontario are growing at the Canadian average. This is in line with most research, which finds very limited price effects from minimum wage increases.

The MEI is right, however, that restaurant prices did experience a bump. Between December 2017 and March 2018, they grew by 4.8% in Ontario; however, this has to be compared to overall price growth which was 2.1% over the same period—leaving a difference of 2.7%. Since then, however, restaurant prices have roughly kept pace with overall price growth and growth in restaurant prices across Canada (which Ontario has also tracked closely, with a very similar 2.6% shift upwards over the national average in early 2018). This relatively small, one-time bump in restaurant prices is not unexpected (and it is 27 cents on a $10 meal). In fact, it shows firms in industries with the very highest concentrations of minimum wage work finding avenues other than cutting jobs to absorb cost increases.

Finally, the MEI is wrong to claim that most studies show no connection between higher minimum wages and lower poverty rates. The latest research states the exact opposite, finding a clear link between higher minimum wages and lower poverty. A very recent “meta-analysis”, or study of studies, took 12 of the most credible new research papers on the topic, even including those from well-known academic opponents of raising the minimum wage and found that for every 10% increase in the minimum wage, the number of non-seniors living in poverty decreased by 2% to 5%. It also found significant increases in household incomes for the bottom half of households, largest among those in the bottom quarter. (For a good, non-technical explanation, see this piece in the Washington Post.)

Past research, today’s jobs numbers, even initial reports from the big banks confirm that a higher minimum wage does not spell doom, either for Ontario’s economy or for low-wage workers. In fact, it appears to have been the boost from the bottom up that was needed. While there is certainly space to study the effects of increasing Ontario’s minimum wage to $14 (and the still, as of writing, planned increase to $15 on January 1, 2019) in more detail, the MEI is only muddying the waters with its simplistic, skewed analysis.

 

[1] The impact on teen (15- to 19-year olds) employment has long been a key feature of minimum wage research, with some earlier research showing statistically significant impacts. Some more sophisticated and more recent studies from the US have overturned these results, finding no significant effects on employment from raising the minimum wage,  even on teens. And even those still-significant estimates from recent Canadian research would find much smaller impacts (by a factor of more than two) than the crude calculations done by the MEI.

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How Doug Ford won and how to challenge him

Last Thursday was a dark day in Ontario as the Conservative Party led by businessman-bully-bullshitter Doug Ford won a majority in the provincial election. Two guests assess the factors behind the Ford’s win and the chances for building an effective opposition to the coming right-wing agenda for Canada’s most populous province.

First up, Doug Nesbitt, PhD student in history at Queen’s presently competing his dissertation on the Days of Action during the last Conservative government in Ontario under Mike Harris. He is also an editor at rankandfile.ca as well as an organizer with the Fight for 15 and Fairness in Kingston, where he lives. He analyzes this 2018 election drawing on links with the Harris years in the 90s, the opposition then and its lessons.

He leaves off exactly where my conversation my second guest, Deena Ladd, begins. Deena is the director of the Worker’s Action Centre in Toronto and one of the main organizers behind Ontario’s wildly successful Fight for $15 and Fairness. She discusses how Doug Ford’s win came about and what this tells us about the strategies that can challenge his government from below.

As always, remember to subscribe above to get new episodes as they appear, rate the show on iTunes and donate to help keep this good thing going. Thanks!

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The Ontario election isn’t about deficits—and that’s a good thing

How big is your deficit? This Ontario election, no one seems to care—and that’s a decisive positive to emerge from a campaign that’s too often been submerged in the politics of personality.

There is more and more light sneaking through the widening cracks in Canada’s austerity consensus. Hopefully, it will shine not only on the latest vote-buying scandal or bout of red-baiting but hit upon some of the big questions of economic policy. Here, the relevant question is not “how big is your deficit”, but “who will it benefit?” Or, put most expansively, “how are you going to transform the economy?”

In part, deficit panic has taken a back seat this election season because of an uncomfortable fact for those on the right usually most eager to stir it up. Mike Moffatt, economist at the centrist Canada 2020 think tank, has very roughly costed out the Conservatives’ platform (something the party has so far steadfastly refused to do) and found that their deficits would most likely be the largest among the three major parties. That’s the result of promising big tax cuts for companies large and small, car drivers, the wealthy, the upper middle class and other core Tory constituencies alongside insubstantial changes to spending. It is transformation biased towards the wealthy.

Doug Ford will protest that he will be able to generate “efficiencies”. These, however, will be either extremely painful cuts—think lay-offs for thousands of public sector workers like teachers, nurses, long-term care support staff or park rangers alongside fewer services—or an unkept promise. Decades of neoliberalism have created a lean public administration as much as the right won’t admit it in public. Anyone claiming to easily find $6 billion in efficiencies, or nearly 5% of Ontario’s budget, without shedding jobs or cutting services is simply lying.

The Ontario Liberals, surely emboldened by Justin Trudeau’s deficit-embracing, progressive neoliberalism, have also settled on steady, modest deficit spending. Deficits allow them to avoid raising taxes (the provincial corporate tax rate has kept falling on their watch) while continuing down the road of slow-motion austerity whose defining features are cost control and welfare state rationalization. Nothing to worry the financial markets and bond raters here. No real transformation either—the cuts of the Harris years are further baked in, only their rough edges softened.

Chastised by their loss in 2014 and emboldened by deficits from everyone else, the NDP is also projecting modest deficits every year of its mandate if elected. These however are due to more substantial increases in both revenues and expenditures than the other two parties, with deficits generated by raising expenditures more than revenues. The important piece is not the deficit but what’s happening with the two components that produce it: expenditures and revenues. On the latter, the Ontario NDP have finally injected the smallest pinch of class politics into their policy, promising to raise taxes on both corporations and the wealthiest.

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Jobs data doesn’t say much about the minimum wage (yet) but lots about growing inequality

We’ve had two months of jobs data in Canada since Ontario increased it’s minimum wage from $11.60 to $14 on January 1, 2017. When January’s Labour Force Survey numbers came out and showed some of the biggest month-over-month losses in years, there was a slew of predictable, reflexive commentary blaming Ontario’s minimum wage hike. Now that we have a second month of data that show modest job gains as well as falling unemployment, down to 5.8% nation-wide and 5.5% in Ontario, the same critics are silent. The lesson is that they should have also been silent about January’s numbers.

Simply put, we don’t know enough to lay the blame for good or bad jobs numbers at the feet of a minimum wage hike in Ontario. Both January’s negative data and February’s positive data should give us pause. The monthly jobs data are volatile. The drop in January was so out of line with long-term trends that it raised the eyebrows of nearly all economists. Part of January’s losses are due to the typical rash of post-holiday lay-offs. But these numbers also seem at least in part statistical error rather than a reflection of something happening in the real world, especially when compared with February’s return to the trend of consistent, if modest, job growth.

Unemployment rates across Canada; Ontario is second lowest at 5.5%. Source: Statistics Canada, The Daily for March 9, 2018.

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Minimum wage whack-a-mole

Minimum-wage whack-a-mole is the best way to describe what I’ve been up to the past couple months. It seems like every week or so in August and September, the business lobby in Ontario was serving up a plate of inaccurate yet headline-grabbing predictions for consumption in the public debate.

Going against the grain of the best academic research and recent experience elsewhere, these reports have attempted to scare Ontarians into thinking that the costs of raising the minimum wage outweigh the benefits. As 53 Canadian economists, including myself, outlined in an open letter published earlier in the summer, new research is clear: raising the minimum wage is good for workers and the economy.

Here’s a quick list of pieces I’ve written over the past months countering the inflated, sometimes heavily so, predictions of minimum wage opponents. (more…)

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What do we do when we Fight for $15

On this episode, three guests provide some perspective on the politics and the economics of the Fight for $15. First, I speak with Jonathan Rosenblum, campaign director at the first Fight for $15 at SeaTac Airport, just outside Seattle, Washington. Workers there won an immediate raise to $15 via a municipal ordinance in 2015. Jon is also an author and has recently published Beyond 15: Immigrant Workers, Faith Activists, and the Revival of the Labor Movement. Next, I move closer to home and talk to Sheila Block, economist at the Ontario office of the Canadian Centre for Policy Alternatives. Sheila lays out the context for the $15 and Fairness campaign in Ontario, one of changing work and a weaker labour movement. Rounding out the show, economics writer and researcher Nathan Tankus returns to the podcast to discuss the economic arguments in favour of raising the minimum wage. We go beyond the narrow issue of  minimum wages to broader challenges to “textbook economics.”

As always, remember to subscribe above to get new episodes as they appear, rate the show on iTunes and donate to help keep this good thing going. Thanks!

 

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The road tolls for thee

Last week, Toronto mayor Join Tory announced a plan to toll two major Toronto highways, the Gardiner and the DVP. The city is starved for cash with huge shortfalls for both infrastructure (new housing, new transit lines) and even everyday operating expenses. Tolls are supposed to help close this gap. But despite the absolutely huge revenue needs of this city, there a case to be made against tolls from the left.

There is a simple practical argument against the proposed tolls: they won’t raise very much money and any revenue is years away. City planners calculate about $200 million per year of new money once tolls are in place. That may sound like much but Toronto needs are in the vicinity of $30 billion just to catch up with a growing population and ageing infrastructure. And the city needs the money now.

toronto-road-tolls-20161124

John Tory has challenged those who oppose the tolls to spell out the alternative. Taxing parking spaces would raise $500 million and could be done right away. Getting residential and commercial property taxes to at least match long-term inflation and beat it, even with the necessary rebates for those house-rich, income-poor, would raise another huge chunk of cash. This isn’t even getting to more creative options—many of them included in an appendix to a KPMG report commissioned by Metrolinx.

Given the revenue crisis, lefties could easily come up with a viable, progressive money-raising plan even from a list prepared by the market-friendly consultants at KPMG. A municipal income tax? Why not since the province and the feds are raising less then they used to through this measure. Even a municipal sales tax with hefty rebates for low-income and working-class folks. It’s not a question of options but political strategy.

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Linda McQuaig on Hudak’s imaginary jobs and Canadian inequality

Today, I’m happy to present another extended interview and my guest is Linda McQuaig. Linda is a National Newspaper Award-winning journalist and commentator who has worked for the Globe and Mail, National Post, Toronto Star and many other outlets. She is also a best-selling author of numerous books that have focused on and popularized a host of economic issues. Her most recent book, co-written with Neil Brooks, is The Trouble with Billionaires: How the Super-Rich Hijacked the World and How We Can Take It Back. 

Just last week, Linda wrote a sharp piece critiquing Tim Hudak’s platform in the upcoming Ontario election. We discuss this article and Hudak’s plans in the first half of the interview, while moving on to more general questions centered on the topic of rising inequality in the second half.

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Hudak’s plans to cut teachers in statistics and politics

It’s election time in Ontario and that means graphs and statistics, facts and factoids, some stale, some new come out of the woodwork. Take the tweet below as an example, one that riffs on the old theme of an exploding public sector encapsulated in Tim Hudak’s promise to cut 100,000 public service jobs:

Let us even take the author’s word that he is non-partisan and found some seemingly interesting data; the focus is the chart, not him. There are two issues. The first is much simpler: the graph is a misportrayal. It uses data from a Statistics Canada sample-based survey to proxy for teacher employment and population data to proxy for student enrolment. While using proxies for missing data can be acceptable and justified, in this case, there is absolutely no reason for it. Both teacher employment data and enrolment data are exhaustively compiled by Ontario’s Ministry of Education. Here is the same graph with correct data:

140513 Teachers vs Enrolment
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