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.

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The $15 minimum wage is good: busting business lobby myths

With the Ontario government seriously considering raising the minimum wage thanks to the tireless organizing efforts of the $15 and Fairness campaign, the labour movement and thousands of supporters, the business lobby is out fear-mongering in force. Here is a tool for the rest of us to fight back. It’s a collection of 5 myths and facts about raising the minimum wage: clear arguments for why $15 an hour is right for Ontario workers and the Ontario economy. This is an edited version of a section prepared for the Rank and File $15 and Fairness Now! An Organizer’s Handbook for Building a Movement.

MYTH #1: Raising the minimum wage will cost low-wage workers their jobs.

FACT: There is resounding evidence that raising the minimum wage is not a job-killer. Economists doing cutting-edge studies have found that the typical minimum wage increase does not cause major overall job loss. “Job loss is more of a threat than a theory.” For instance, the threat that robots will take our jobs has been made for over 200 years and full-time work is still 40 hours a week or more! The argument that jobs will be shipped offshore fails similarly. As much as business tries, it’s not yet possible to move a barista job halfway around the world. There are still so many jobs that require human labour.

A $15 minimum wage would pump billions of dollars into the pockets of low-wage workers and thus the Ontario economy. Jobs would be created as a result of the new economic activity, compensating for losses incurred by businesses that can only function on poverty wages. As the minimum wage goes up, workers become more valuable to businesses and jobs generally get better. Economists have found that when the minimum wage rises workers get more training and there is less turnover. Businesses put more energy into raising efficiency rather than keeping tabs on workers in poverty. And wages tend to become more equal: wages for managers and other high-paid workers don’t go up as much and businesses spend proportionately more on the lowest-paid.

Most importantly, potential job losses are not the only thing we should care about when the minimum wage goes up. Less poverty, better jobs, higher incomes for the lowest-paid — all of these would far outweigh the impact of a minimal job loss.

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