Wynne too in­vested in wage hike to back down

St. Thomas Times-Journal - - COMMENT - DAVID REEVELY dreevely@post­media.com

Rais­ing On­tario’s min­i­mum wage will cost 50,000 jobs and much of the money meant to help work­ing poor peo­ple will end up in the hands of the rel­a­tively well-off, says a new anal­y­sis from the gov­ern­ment’s Fi­nan­cial Ac­count­abil­ity Of­fice.

Hik­ing the min­i­mum wage from $11.40 to $15 an hour by 2019 is a sig­na­ture move for Premier Kath­leen Wynne and her Lib­eral party, the big­gest item on a list of labour re­forms the premier says are about mak­ing On­tario’s econ­omy work for more peo­ple. It’ll af­fect an es­ti­mated 1.6 mil­lion peo­ple who make less than $15 an hour now.

A leg­isla­tive com­mit­tee ex­am­in­ing the is­sue heard from store own­ers, restau­ra­teurs and re­sort op­er­a­tors, most of whom said they’ll have to lay off their min­i­mum-wage work­ers and cut oth­ers’ hours to stay in busi­ness.

Their claims are easy to dis­miss if you want to do that. The point of rais­ing the min­i­mum wage is to trans­fer some prof­its from own­ers to low-wage work­ers and you wouldn’t ex­pect the own­ers to love it. Em­ploy­ers moan about min­i­mum-wage hikes but some­how we still have an econ­omy. And amid the com­plain­ers, there are em­ploy­ers who say that pay­ing bet­ter gets them hap­pier work­ers and health­ier busi­nesses. The econ­omy is a big enough thing for ev­ery­one to be right.

The min­i­mum wage cov­ers two dif­fer­ent kinds of work­ers: those who work at or near min­i­mum wage for much of their lives and those just start­ing out. Or, put an­other way, those whose em­ploy­ers con­sider their work to be worth what they’re paid, and those whose em­ploy­ers hope their skills will grow into their wages.

The first group will mostly be OK when the min­i­mum wage in­creases. The sec­ond group is in trou­ble.

“Cana­dian re­search sug­gests that a 10 per cent in­crease in min­i­mum wages has his­tor­i­cally re­sulted in a three to six per cent re­duc­tion in teen em­ploy­ment,” the FAO says. And we’re talk­ing here about a 32 per cent wage hike.

“Stud­ies have in­di­cated that busi­nesses which face higher pay­roll costs typ­i­cally re­spond by lay­ing off in­ex­pe­ri­enced work­ers. Given this, the job losses would be ex­pected to be con­cen­trated among teens, young adults, and re­cent im­mi­grants,” the re­port says. Ex­pect a loss of 65,000 jobs as en­try-level em­ploy­ees are re­placed by au­to­ma­tion or sim­ply done with­out.

On the flip side, about 15,000 of those jobs will be made up by higher spend­ing, as re­main­ing min­i­mum-wage work­ers get paid more and spend more.

Once all the push­ing and pulling is done, the FAO ex­pects a net loss of 50,000 jobs, an in­crease in prices of 0.5 per cent, and an in­crease in real labour in­come of 1.3 per cent.

So yes, the min­i­mum-wage earn­ers who keep their jobs will end up a lit­tle bit bet­ter off. But an odd thing hap­pens when you zoom out and look at house­hold in­comes in­stead of in­di­vid­ual in­comes.

Ac­cord­ing to the FAO, 60 per cent of the house­hold-in­come in­creases from rais­ing the min­i­mum wage will go to house­holds mak­ing less than the me­dian house­hold in­come — the peo­ple the gov­ern­ment wants to lift.

Yet 40 per cent will go to house­holds mak­ing more than the me­dian in­come of about $92,000 — mainly be­cause few house­holds rely ex­clu­sively on min­i­mumwage earn­ers. A mean­ing­ful per­cent­age of them are young peo­ple liv­ing with par­ents who make more money.

“Since min­i­mum wages tar­get low-wage work­ers, but not nec­es­sar­ily low-in­come fam­i­lies, rais­ing the min­i­mum wage would be an in­ef­fi­cient pol­icy tool for re­duc­ing over­all poverty,” the watch­dog says.

“Will be,” it should say. The Lib­er­als are much too in­vested in the idea to back down. Wynne reaf­firmed her com­mit­ment on Tues­day af­ter the FAO re­port came out. She’s “ob­li­gated to act,” she said.

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