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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Labour’s fate and revival in the US and Canada

This week, two labour historians talk about their new books on Canadian and US workers’ movements in the 20th century, books which offer important and practical lessons for unions today.

First up, I speak with Barry Eidlin, Assistant Professor of Sociology at McGill University, about his just-published book, Labor and the Class Idea in the United States and Canada. The book seeks to explain the divergence between the Canadian and US labour movements since the 1960s and we discuss everything from the recent Janus decision to how the US labour law regime obscures the fundamental power imbalances in the workplace to how Canadian unions still need internal revival despite their (somewhat) better position.

Next, I talk with Christo Aivalis, Postdoctoral Fellow in History at the University of Toronto, about his book, The Constant Liberal: Pierre Elliot Trudeau, Organized Labour and the Canadian Social Democratic Left. The title speaks for itself but the relationship between Trudeau and labour foreshadows how neoliberalism would be implemented in Canada in later decades and holds lessons for how labour should orient politically as well as fight Trudeau the younger today.

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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West Virginia teachers strike to win

This episode is dedicated to the recent, inspiring and victorious teachers’ strike in West Virginia. West Virginia teachers went out on strike in late February over low pay and continued attacks on the health insurance plan they share with all other state workers. They stayed out despite an initial deal signed by the Governor and their leadership and ultimately won a 5% raise not just for themselves but for all public employees in West Virginia as well as promised reforms to their insurance plan, known as the PEIA. I spoke with two teacher leaders from West Virginia and an expert on teacher unionism to get some perspective on how this strike came about, how it won and what others can learn from its example.

My first guest is Emily Comer, a high school Spanish teacher in South Charleston, West Virginia; she is a rank-and-file activist in her local of the AFT, the American Federation of Teachers and co-author of this excellent piece on the strike. I next speak with Lois Weiner, professor in the Department of Elementary and Secondary Education at New Jersey City University and a specialist in urban teacher education and teacher unionism. Her research actively supports teachers who want to transform their unions; she wrote this piece on the strike that I reference in my interview. My final guest is Brandon Wolford, local president of the WVEA in Mingo Country. The WVEA is the West Virginia Education Association and alongside the AFT it is one of the two big teachers’ unions in West Virginia; Mingo County has a storied place in labour history as an epicentre in the Mine Wars and mining struggles throughout the 20th century.

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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Media get it wrong on Bank of Canada minimum wage study

Over a million workers in Ontario just got a big raise thanks to tireless, bottom-up orgainizing, but if you look to the media it’s a bad news story. The same, tired headlines are back. Yesterday, the CBC ran a story titled, “Minimum wage hikes could cost Canada’s economy 60,000 jobs by 2019”. Today, the Toronto Star’s front page blared, “Wage hike could cost 60,000 jobs, Bank of Canada says”.

Reading either of these headlines or the stories that follow, you could be forgiven for not knowing that the cited Bank of Canada research note had a positive conclusion about the effect of minimum wage increases on workers. A major claim of the Bank’s note is that, for workers, the benefits of increasing the minimum wage outweigh the costs in terms of labour income. First of all, the Bank is not predicting 60,000 pink slips but merely a slowdown in continued job growth. The 60,000 figure is a national, annual one and represents just 0.3% of total employment. Monthly job growth has at times exceeded this number.

More importantly, the Bank found that the costs of projected (remember these are still only projections) lower employment are outweighed by the benefits from higher economy-wide wage income stemming directly from the minimum wage increase. The authors write, “On net, however, real labour income should be higher following the implementation of these measures relative to otherwise. This is because the 0.7 per cent increase in the level of aggregate real wages more than offsets the 0.3 per cent decrease in total hours worked.” (more…)

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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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Canadian economists support $15, media round-up

53 Canadian economists, myself among them, have signed an open letter in support of the $15 per hour minimum wage. The letter follows on the immense bottom-up campaign in Ontario led by the Fight for $15 and Fairness, which has successfully pressured the provincial government to announce a move to $15 by 2019. It should also be a boost to movements in other provinces fighting for the same.

Here’s a key excerpt from the letter which outlines the now well-established economic case for $15:

But low wages are also bad for the economy. There are good economic reasons to raise the incomes of low-wage workers. Aggregate demand needs a boost. While Canada escaped the harshest impacts of the 2007-08 financial crisis, our country has also seen a slowdown in growth. We risk further stagnation without reinvigorated economic motors. As those with lower incomes spend more of what they earn than do those with higher incomes, raising the minimum wage could play a role in economic revival, improving macroeconomic conditions.

For years, we have heard that raising the minimum wage will kill jobs, raise prices and cause businesses to flee Ontario. This is fear-mongering that is out of line with the latest economic research. Using improved techniques that carefully isolate the effects of minimum wage increases from the remaining noise in economic data, the weight of evidence from the United States points to job loss effects that are statistically indistinguishable from zero. The few very recent studies from Canada that have used these new economic methods agree, finding job loss effects for teenagers smaller by half than those of earlier studies and no effect for workers over 25.

There are many possible reasons for minimum wage increases to lead to little or no job loss. Studies have found lower turnover, more on-the-job training, greater wage compression (smaller differences between higher- and lower-paid workers) and higher productivity after minimum wage increases. In short, raising the minimum wage makes for better, more productive workplaces.

The business lobby has also suggested that any minimum wage increases will simply be passed on as higher prices. First, the above-mentioned improvements will offset some part of the higher labour costs to business. Second, there is no instantaneous, automatic mechanism between higher labour costs and higher prices. Some of the costs not absorbed by increased efficiency may go to price increases, but these are likely to be small and, for low-wage workers, offset by higher incomes coming from rising wages. Furthermore, if we remember that over 1 in 4 workers in Ontario makes under $15 per hour, we should not treat slightly higher inflation as the main criterion of successful policy; instead we should focus on the substantial benefit to low-wage workers, their families and the economy as a whole.

(more…)

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Neoliberalism restructures work and pensions

On today’s show, two sociologists talk about aspects of neoliberal restructuring. First, Nicole Aschoff, sociologist, author of The New Prophets of Capital and until very recently managing editor of Jacobin magazine speaks with me about the auto industry, Trump and why globalization shouldn’t be solely blamed for the destruction of good jobs even while it is nevertheless in crisis. Next, Mike McCarthy, assistant professor of sociology at Marquette University in Milwaukee, discusses his recent book Dismantling Solidarity: Capitalist Politics and American Pensions since the New Deal about how the pensions system has been transformed in ways that leave workers more vulnerable.

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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Women on strike in the US and Poland

For International Women’s Day, two interviews on women’s protests and strikes, in the USA and in Poland.

My first guest is Barbara Smith. Barbara is an icon of the US women’s movement, particularly it’s Black radical wing. She helped establish Black women’s studies as a discipline, was a founding member of the Combahee River Collective in the 1970s, helped establish Kitchen Table: Women of Color Press and went on to run and win an insurgent campaign against the Democrats for a seat on Albany city council. She is presently on the National Planning Committee of the International Women’s Strike USA, which is bringing a much-needed radicalism to this year’s International Women’s Day in the US.

My second guest is Joanna Grzymala-Moszczynska. Joanna is completing her PhD in psychology in Krakow and is a leading member of Razem, the new left-wing party in Poland that narrowly missed out on parliamentary representation in the 2015 elections that brought the reactionary PiS (or Law and Justice) party to power. She was among the organizers of last October’s women’s strike in Poland that brought a reinvigorated women’s movement out onto the streets and stopped a tightening of Poland’s already-barbaric anti-abortion law.

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

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Trudeau’s Growth Council is back with more bad ideas

Justin Trudeau’s friends in finance, consulting and big business dominate the grandly named Advisory Council on Economic Growth. A few months after recommending a giant privatization scheme, the gang is back with more ideas, many very good for them but very bad for you and me.

The biggest news: a recommendation to increase the retirement age from 65 to 67. Trudeau has been breaking promises and sticking with Stephen Harper’s policies left, right and centre, so it’s no surprise to see his economic advisors raising another Conservative corpse from the dead—despite the fact that Trudeau actually rolled back Harper’s shift of the retirement age up to 67 in his first budget. Of course, when Harper proposed it, it was mean-spirited, when Bay St. wants it, it’s the bleeding edge of innovative growth strategy!

Beyond this one terrible idea, the Council’s report is full of warmed-over buzzwords and overblown market-speak. Recommendations will “re-imagine the role of government (specifically, as a convener/catalyst and as an investor)” and “catalyze the formation of business-led ‘innovation marketplaces.'” There’s a bit of Sheryl Sandberg feminism for the 1%: gender inequality ameliorated via “a corporate gender diversity challenge.” Yet elsewhere the ideological bent is more transparent: “much of our potential is untapped, held back due to policies (e.g., excessive regulations).” Chamber of Commerce talking points shouldn’t be a surprise in a document prepared in the C-suite, but they’re being sold as “inclusive growth.”

(more…)

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