No, Mr. Brown—not everyone wants a $15 minimum wage

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Appeared in the Ottawa Sun, June 28, 2017
not everyone wants a 15 minimum wage

Recently, Premier Kathleen Wynne announced a plan to increase Ontario’s minimum wage to $15 per hour over the next 18 months.

Shortly thereafter, Ontario’s Progressive Conservative Leader Patrick Brown voiced his support for the plan but suggested the timeline may be too fast. “I think everyone wants to get to a $15 minimum wage,” he said, “but it’s the pace.”

Brown is mistaken. Not everybody wants a $15 minimum wage in Ontario at any point in the foreseeable future. In fact, many experts worry this objective will do more harm than good.

Here’s why.

There’s an old saying that “the best anti-poverty program is a job.” This means poverty is much less common in households where at least one person holds a full-time job than in households where nobody works or somebody works, but only part time.

Recent research from the University of California, Davis’ Center for Poverty Research confirms this reality. According to the research, the poverty rate in the United States was 10 times higher for individuals who did not work at all than for people working full-time. For part-time workers, poverty rates were five times higher than for full-time workers.

The research studied American data, so the numbers might be somewhat different in Canada. But the fundamental truth almost certainly holds here as well—a full-time job is the most reliable path out of poverty.

Our anti-poverty strategies should therefore focus largely on creating economic conditions in which businesses thrive, jobs are created, and wages are driven up by market pressures—not legislative fiat.

And crucially, we should be skeptical of anti-poverty strategies that will actually make it harder for people to find work. Which is exactly what minimum wage increases will do.

The notion that a higher minimum wage kills jobs is not terribly controversial among experts in this country. Canadian research consistently shows “disemployment” effects. Estimates of effect size vary, but recent studies suggest a 10 per cent increase to the minimum wage reduces employment for teens by about 3-6 per cent, and for young adults by a similar (but slightly smaller) amount.

Given that raising the minimum wage to $15 would represent a 32 per cent boost to Ontario’s minimum wage, the result will be a lot more Ontarians out of work, which is bad news if you want to fight poverty.

And just this week, we have even more evidence. A major new study from Seattle suggests that city’s experiment with a rapidly increasing minimum wage is killing jobs at an alarming rate. In fact, so many jobs have been lost that, on average, low-wage workers are losing about $1,500 annually thanks to the policy. Clearly, this well-intentioned policy is backfiring badly.

Instead of enacting policies that kill jobs, if the government wants to fight poverty it should focus on creating economic conditions favourable for job-creation and market-driven wage growth.

Furthermore, anti-poverty policies should make it easier for people to find work—not discourage hiring. For example, policies such as the federal Working Income Tax Benefit (which tops-up the labour market earnings of low-income households) are preferable to raising the minimum wage because it boosts the purchasing power of low-income families without comparable job-killing effects.

Contrary to Patrick Brown’s assertion, not everybody wants Ontario’s minimum wage to climb to $15. That’s not because opponents don’t want to fight poverty, but because a higher minimum wage makes that fight more difficult to win.