Fraser Forum

Raising the minimum wage is not the right policy to help B.C.’s working poor

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In a recent opinion piece, Irene Lanzinger, president of the B.C. Federation of Labour, argued that British Columbia should establish a $15 minimum wage to help fight poverty. Helping the working poor is of course a laudable goal, but raising the minimum wage is not the right policy.

Let us explain.

For starters, the data show that 89 per cent of minimum wage earners in B.C. do not live in low-income households as measured by Statistics Canada’s low income cut-off  (LICO). This statistic warrants a brief pause. After all, the policy that Lanzinger and others propose to help reduce poverty does not even efficiently target the very people we all want to help.

This result may seem counter-intuitive. How can almost nine of every 10 minimum wage earners in the province not be poor?  

The answer becomes clear when we sift through the data to better understand who these minimum-wage earners really are.

It turns out that 54 per cent of them in B.C. are teenagers or young adults aged 15 to 24, with the vast majority of them (80 per cent) living with their parents or other relatives.

Another 19 per cent of B.C.’s minimum wage earners have an employed spouse, three quarters of whom earn more than the minimum wage. This reinforces the previous statistic that minimum wage earners live in households that tend to have multiple income earners, meaning they are not living on the wages of one minimum wage worker alone.

Just two per cent of minimum wage earners are single parents with a young child, which should diffuse the misperception that minimum wage earners are largely single parents struggling to survive.

Another important fact about minimum wage earners: 57 per cent work part-time. Consider that just three per cent of all fulltime workers in B.C. earn the minimum wage, refuting the notion that a large cadre of fulltime career workers is dependent on the minimum wage.

The facts paint a picture of the typical minimum wage earner that may be surprising to some. A young person, usually living with parents or other relatives, while often in school and working a part-time job. For many youths, a minimum wage job is their first and often a stepping stone to higher paid employment as they gain experience and skills.

Apart from inefficiently targeting the working poor, there are negative economic consequences to raising the minimum wage.

If the B.C. government simply mandates that businesses pay a lot more for low-skilled labour, it won’t magically change the productivity of these workers. It will, however, put employers in a position of either paying more than a worker brings to the bottom line, or letting that worker go or keeping them employed but with fewer hours or training.

This isn’t mere theory. In a recent study, we summarized the peer-reviewed academic research in Canada that looked at the actual results of historical changes in the minimum wage across provinces. That research tends to find that a 10 per cent increase in the minimum wage will decrease employment of teens and young adults by three to six per cent.

Fortunately, there are better ways to help the working poor that both target the people we’re trying to help and do not make it more difficult for employers to hire. That’s where the debate should be.

Advocates such as Lanzinger have the laudable goal of lifting B.C. working households out of poverty. However, minimum wage hikes are a blunt instrument that may perversely hurt the poor by making it harder to find employment.

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