Min. wage hike will create more problems than it solves

Is the minimum-wage increase a good idea?

Tuesday, April 7th, 2009

On Monday, there was a booth in the University Community Centre urging students to fight to increase minimum wage from $8 to $10. The Ontario government recently announced it will raise minimum wage to $10.25 over the next three years. The spirit of such action is admirable, yet the circumstances should have been more carefully examined.

Proponents of a minimum-wage increase cite the success of high European minimum-wage laws and the difficulties facing low-income earners as reasons to raise the bar. In addition, as students " who make up over half the province’s minimum-wage earners " carrying large debt, the idea seems like a good solution.

But while these issues are important, raising minimum wage isn’t the most efficient way to solve them. Our system is unique, and it’s naive to conclude what works for Europe will work for us.

A minimum-wage increase would negatively affect small and medium-sized businesses, likely leading to a loss of jobs. Smaller businesses already struggle with high commercial property taxes, energy prices, new registration fees and licensing costs, and a high Canadian dollar.

The negative effects of a forced increase in labour costs will be exacerbated by the fact that companies won’t just be forced to raise the wages of their minimum-wage workers, but also their more skilled workers.

Such increases will likely cause some companies to dodge added labour costs by coercing employees into unpaid overtime or by using under-the-table employees. These “cash” employees, who are already a problem, are a good example of how the over-regulation of wage laws would further promote an underground economy, encouraging lawlessness and depriving the state of legitimate tax revenue.

However, the increased labour expense likely won’t fall on businesses alone. It will also cost consumers through higher product prices. Companies providing cheap food, like fast-food chains or grocery stores, are particularly reliant on minimum-wage workers and will be particularly sensitive to wage increases, making them more likely to raise prices. This will harm those living on the poverty line.

Other than students, minimum-wage earners are disproportionately young, female, and/or immigrants. Rather than paying these people $2 more an hour at the risk of hurting the economy, it’s important to ask why these people are stuck at this pay level and how they can be helped. For instance, better subsidized day care, better immigrant integration programs, international degree recognition, and better access to education would help social mobility.

Increasing accessibility to post-secondary education is one of the most important issues of today’s political agenda, and the benefits of doing so are countless. Since most students spend their school years " or at least their summers " in minimum-wage jobs while struggling to pay off hefty student loans, a wage increase seems reasonable to help people survive university.

However, initiatives to lower tuition or to make OSAP grants more widely available would be far more efficient and wouldn’t include economic repercussions. In addition, this kind of policy has the added bonus of making post-secondary education more appealing for those who may not have considered it.

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