Minimum wage increase not what it seems

Hang around the political industry long enough and you discover that no facts change the minds of vested interests married to preconceived beliefs.

No topic better illustrates this than the minimum wage. You hear labour telling you that if we don’t have large, consistent increases, it will be the ruination of society — and the Chamber of Commerce/Canadian Federation of Independent Business (CFIB) types telling you that annual, consistent, minimum wage increases will be the ruination of job-creation efforts and the economy.

Come Saturday, Saskatchewan’s minimum wage will increase to $10.72 an hour as part of a relatively new policy of tying annual minimum wage increases to both the Consumer Price Index (CPI) inflation rate and the average annual salary increase.

The first vested-interest-driven myth that should be addressed is labour’s contention that minimum wage increases — especially before the new policy arrived in 2011 — were too small, too few and too rare under Premier Brad Wall’s Saskatchewan Party government.

Since coming to power in November 2007, Wall’s government will have increased the minimum wage nine times, from $7.95 an hour to its present rate — a 34.8-per-cent increase or close to a four-per-cent-a-year wage hike, which surely will make some of you envious. About half these increases occurred under the new format and half under the old policy of supposedly more random increases recommended by the Minimum Wage Board.

The Sask. Party government also pointed out Monday that low-income workers benefit from “the highest tax-free income threshold in Canada” — $48,320 a year for a family of four before you are taxed on your income. On its 2016 income tax filing, a family of four will pay $2,302 less in income tax than in 2007.

Of course, the CFIB/chambers of commerce argue that tax changes should be the government’s focus when it comes to helping the working poor and that the Sask. Party has been far too generous with minimum wage increases.

Business types consistently argue that hiring takes a hit any time we see a minimum wage hike.

Well, like labour on the regularity and relative size of minimum wage increases, there’s no convincing evidence that business is right about minimum wage increases impacting hiring.

Despite consistent minimum wage increases, the first term of the Wall government coincided with the highest population and job growth Saskatchewan has ever seen — about 30,000 jobs.

Even during Wall’s second term between 2011 and 2015, Saskatchewan saw jobs increase by 37,900 (notwithstanding the indexing of the minimum wage to inflation).

Jobs in Saskatchewan are down by 3,400 in the first eight months of 2016, but it’s interesting to note that — notwithstanding the decline elsewhere — jobs in retail and food services (where more than half of Saskatchewan’s minimum wage earners work) have continued to increase.

In fact, government numbers show only 23,200 minimum wage earners in the province, less than four per cent of the workforce.

Even when one generously doubles that figure to 45,000 to include those who earn slightly above minimum wage and might be impacted by a mandated minimum wage hike, it’s still only eight or nine per cent of the workforce, says economist and statistician Doug Elliott of SaskTrends Monitor.

“There is absolutely no correlation” between minimum wage increases and job increases or declines, said Elliott, adding the health of the overall economy is a bigger factor.

But Elliott has an even more fascinating observation: If anything, labour and business are arguing the wrong side of whether minimum wage increases should be indexed to inflation or discretionary income.

Notwithstanding the business community’s opposition to an indexed minimum wage, Elliott noted in the March 2011 edition of SaskTrends Monitor that had the minimum wage been indexed to the Consumer Price Index in 2001, it would have been $7.45 an hour in 2010 rather than $9.25 an hour.

That doesn’t exactly fit with labour’s narrative, either.

What it does show, however, is that the Wall government is likely closer to the right minimum wage than either side will admit.