FRED­ER­IC­TON

The gov­ern­ment lauds its re­cent boosts to the min­i­mum wage. But do they hurt busi­nesses with­out help­ing work­ers?

Investment Executive - - CONTENTS - BY DONALEE MOUL­TON

A right-wing think-tank crit­i­cizes a raise in the prov­ince’s min­i­mum wage.

this past spring, new brunswick raised its min­i­mum wage once again. That was a ma­jor mis­take, ac­cord­ing to a new study from the Hal­i­fax-based At­lantic In­sti­tute for Mar­ket Stud­ies (AIMS).

New Brunswick’s new min­i­mum wage is $11 an hour, a 35¢ jump from the pre­vi­ous level and the 12th in­crease since 2007. In fact, New Brunswick­ers’ wages are in­creas­ing at the fastest rate in Canada.

This re­cent in­crease is good news for the en­tire prov­ince, says Premier Brian Gal­lant: “We un­der­stand that when you put more money into the pock­ets of New Brunswick­ers, they will buy and in­vest more. This helps strengthen the econ­omy.”

No, it doesn’t, the AIMS re­port con­cludes. Dis­miss­ing con­tentions that higher min­i­mum wage lev­els re­duce poverty while hav­ing only neg­li­gi­ble ef­fects on em­ploy­ment, the re­port’s au­thors — Matthew Lau, an eco­nom­ics writer, and AIMS pres­i­dent and CEO Marco Navarro-Génie — point to what they found to be se­ri­ous draw­backs to hik­ing a min­i­mum wage: the higher the hourly rate, the more low-skilled work­ers will be legally priced out of em­ploy­ment. Oh, yes, the re­port adds, most em­pir­i­cal ev­i­dence sup­ports this as­ser­tion.

The AIMS re­port sug­gests the re­search demon­strates that rais­ing the min­i­mum wage is not an ef­fec­tive anti-poverty de­vice and calls on all four pro­vin­cial gov- ern­ments i n At­lantic Canada to scrap leg­is­la­tion for rais­ing min­i­mum wages.

That’s un­likely to hap­pen, es­pe­cially in New Brunswick, which her­alds its ris­ing min­i­mum wage. Ac­cord­ing to that prov­ince’s Lib­eral gov­ern­ment, New Brunswick con­sis­tently has been among the growth lead­ers in av­er­age weekly earn­ings in re­cent months and con­tin­ues to lead the coun­try in growth on a year-to-date ba­sis. The min­i­mum wage in­creases, the Lib­er­als as­sert, have con­trib­uted to that growth.

In­deed, some busi­nesses laud the min­i­mum wage hikes, point­ing to im­proved staff re­ten­tion and morale — ben­e­fits that spi­ral out­ward to in­clude cus­tomers and the econ­omy at large. But the AIMS also takes aim at that con­tention.

“Wages are sub­ject to the in­con­tro­vert­ible law of demand,” the re­port states. “Thus, if the gov­ern­ment raises the cost of em­ploy­ing low-skilled work­ers through min­i­mum wage leg­is­la­tion, then fewer low-skilled work­ers will be em­ployed.”

Par­tic­u­larly hard hit by min­i­mum wage in­creases, the AIMS re­port ar­gues, are young peo­ple — a key de­mo­graphic for re­ten­tion in an ag­ing prov­ince such as New Brunswick. Cana­dian stud­ies cited by the re­port found that rais­ing the min­i­mum wage by 10% re­duces youth em­ploy­ment by 3%-6%.

The re­port con­cludes that: “Rais­ing the min­i­mum wage by up­wards of 50% won’t help peo­ple with­out jobs. It won’t help young peo­ple find jobs. It will clearly in­crease the chal­lenges faced by small busi­nesses and non-prof­its. It won’t re­duce poverty.”

The New Brunswick gov­ern­ment is likely to en­gage in this de­bate, hav­ing iden­ti­fied min­i­mum wage in­creases as a cen­tral com­po­nent in its anti-poverty mea­sures. But, ul­ti­mately, for the prov­ince’s premier, the fun­da­men­tal is­sue may not be eco­nomic at all.

“This [rise] im­proves New Brunswick fam­i­lies’ qual­ity of life,” Gal­lant says, “as they can in­vest in ed­u­ca­tion and train­ing, healthy liv­ing and their com­mu­ni­ties.”

SUPERPIXEL DE­SIGN / COSTI G

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