Wages and the law of supply and demand

Re: Liberals accused of ‘pitting employer against employee’ — Jan. 9

As consumers, we all have an innate understanding of the law of supply and demand. If the price of a cup of coffee goes up 30 per cent we are inclined to drink less coffee. Labour is not exempt from the law of supply and demand. When the wage rate — the price of labour — increases, the supply of people willing to work at that rate of pay will increase and the demand for workers at the new wage rate will be less than the demand for workers at the previous wage rate.

Thus, when the government requires a 30-per-cent increase in the minimum wage between the end of last year and a year from now, it should come as no surprise that employers will act to reduce their costs of doing business. Employers will either reduce the number of employees or, in order to maintain their level of service, will reduce nonwage labour costs by decreasing workers’ monetary benefits.

Two aspects of the Ontario government’s legislation that increases the minimum wage by such a large percentage are disturbing. First, the spin promoting the change focuses exclusively on the benefits to workers who will keep their jobs while ignoring the penalties paid by employers and workers who become unemployed or have reduced benefits. Second, Labour Minister Kevin Flynn made the statement, “It’s the act of bullies that has no place in this province,” in response to the actions of employers who simply behaved in accordance with the law of supply and demand. How ironic. The real bully is the government that legislated the minimum price of labour.

I have two questions about the proposed hiring of 175 new government employees to monitor and enforce the new wage minimum: Will they be paid the minimum wage, and what real value is being added to society by the work they will do?

Overall, we should not be surprised about this incremental step toward a guaranteed annual income for everyone. It is further evidence of the “boiling frog” strategy embraced by governments at all levels. But that is another story.

John B. Moore Professor Emeritus University of Waterloo Waterloo