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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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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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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