VANCOUVER, BC—Increasing British Columbia’s minimum wage to $10.25 an hour could lead to a loss of more than 52,000 jobs, according to a new report from the Fraser Institute, Canada’s leading public policy think-tank.
“While increasing the minimum wage may be done with good intentions, the facts show that it has very negative consequences,” said Niels Veldhuis, Fraser Institute senior economist and co-author of Estimating the Economic Impact of British Columbia’s Minimum Wage Increase
“When governments impose high labour costs on businesses, employers react by hiring fewer workers and reducing the number of hours employees work.”
The study examines existing academic research from Canada and around the world measuring the effects of increases to minimum wages, and finds the overwhelming consensus is that increasing the minimum wage has a significant, negative impact on employment, particularly for younger workers.
Based on the Canadian research, the authors calculate that an increase in B.C.'s minimum wage to $10.25 per hour from $8 per hour will result in job losses ranging from 9,391 jobs to 52,194 jobs.
“This is a conservative estimate that only looks at the impact on teen and youth workers,” Veldhuis said.
The report notes that a gradual increase in the minimum wage—in B.C.’s case, three 75-cent increases over next year—will do little to ease the burden on employers or prevent job losses.
“The time period over which the $2.25 increase will roll out is relatively short, and the overall increase too large for the adverse employment effects to be mitigated, especially in the current economic climate,” Veldhuis said.
In addition to job losses and reduced hours, the report points out that higher minimum wages have other negative effects, including fewer benefits and less training for workers.
“Fewer opportunities and less training for young adults are especially unfortunate, given that entry-level jobs, many of which pay the minimum wage, are a stepping stone to better paid employment,” said Amela Karabegović, Fraser Institute senior economist and co-author of the report.
“Research shows that after one year, approximately 60 per cent of minimum wage workers earn more than the minimum wage. After two years, about 80 per cent do so. But without landing that critical first job, one can’t move up the income ladder.”
The evidence from Canada also suggests that minimum wage hikes do not reduce poverty. A study published in Labour Economics
earlier this year tracked increases in provincial minimum wages from 1981 to 2004 and found that a 10.0 per cent increase in the minimum wage caused poverty rates to climb by 4.0 to 6.0 per cent.
“The evidence from Canada shows the opposite of what minimum wage advocates claim. Rather than decrease poverty, minimum wage increases only reduce job opportunities provincewide,” Veldhuis said.
“The B.C. government has indicated that it will focus on job creation in B.C. If that’s the goal, it should reconsider the recent minimum wage hikes.”