Impact of new minimum wage needs a review

Given the enthusiastic certainty with which the Notley government trumpeted the need for a $15-an-hour minimum wage, it’s no surprise that they have little curiosity in knowing whether their approach is working.

The minimum hourly wage went from $10.20 to $12.20 under the NDP. In October, it will jump to $13.60 before settling at $15 next year.

Premier Notley once predicted that raising the minimum wage would actually create jobs, so the idea of maintaining vigilance for any potential negative impacts — let alone reconsidering their course of action — would no doubt seem strange to them. A year ago, however, Labour Minister Christine Gray suggested they would be studying the impact. While dismissing concerns about the increases, she added: “we’ll continue to monitor that.” There was no elaboration as to how or by whom this would be done.

News out of Seattle this past week would suggest that “monitoring that” is indeed something we ought to have been doing. Seattle, like Alberta, is marching toward a $15-an-hour minimum wage, but Seattle made a point of studying the impact and ensuring that extensive data would be collected.

The study released last week paints a disturbing picture. The city’s initial jump to $11 an hour appeared to have little impact, but the jump to $13 was another story. The University of Washington researchers commissioned to do this work found that the second phase of the increase hit minimum-wage earners hard. The number of hours worked fell dramatically, both as a result of jobs being cut altogether and hours being cut for those who didn’t lose their jobs. All told, this added up to an average earnings drop of $125 per month.

In an Alberta context, that’s half a year’s worth of a typical family’s carbon tax bill being dumped onto low-income earners every single month.

It’s not necessarily the case that Seattle will reverse course, and it may well be that Alberta is better positioned than other jurisdictions to absorb the increase. However, even the NDP realized that they couldn’t jump to $15 an hour in one fell swoop, nor could they push it to $20 or $25 an hour. Even the most ardent proponents of minimum wage concede that at some point, there will be negative repercussions.

So what is that upper limit? Did Seattle cross that threshold? Are we about to? It seems worth knowing.

The NDP knew from the outset that they were taking Alberta into uncharted waters. In fact, that was the specific phrase used in a briefing note prepared in 2015 for the labour minister. It warned that “job loss, and perhaps significant job loss, is one realistic possibility.”

Moreover, though, aside from the question of how large or how minimal job losses or other negative impacts might be, is a higher minimum wage reducing poverty?

A study done in 2011 found that a 10 per cent rise in the minimum wage is significantly associated with a four to six per cent increase in the percentage of families living under Low Income Cut Offs. A 2009 study in Ontario found a lack of overlap between minimum wage earners and poor households, and concluded that raising the minimum wage “will lead to virtually no reduction in the level of poverty.”

Let’s not lose sight of the fact that this is an incredibly ineffective way of addressing poverty, especially given all of the other tools at governments’ disposal.

There’s nothing stopping others from studying all of this, and undoubtedly someone will. Perhaps even a new government in 2019 will slow things down and seek such a review.

In the meantime, unfortunately, it’s full steam ahead for a government eager to remain blissfully unaware about any potential fallout from one of their centrepiece ideological projects.

So what is that upper limit? Did Seattle cross that threshold? Are we about to?