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.

(more…)

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