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Alberta’s minimum wage hike is a success

Charlemagne

Well-known member
Jul 19, 2017
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Alberta’s minimum wage hike is a success

By Ian Hussey in Opinion

September 19th 2018

Alberta’s minimum wage was tied for Canada’s lowest when Rachel Notley became premier in May 2015, and the province had the dubious distinction of having the highest level of income inequality and the largest gender income gap.

On Oct. 1, Alberta’s minimum wage will rise to $15 an hour — a 47 per cent hike over three years. Raising the minimum wage to $15 an hour was a key plank in the Alberta New Democratic Party’s 2015 election platform. After the election, the new NDP government wasted little time in announcing public consultations on raising the minimum wage, and on Oct. 1, 2015 the provincial minimum wage was increased by a dollar.

Minimum-wage hikes don’t hurt our economy, they help more working Albertans share in the province’s prosperity - Ian Hussey from @ParklandInst

Further increases in 2016 and 2017 led to the current rate of $13.60 and eliminated the lower wage for workers who serve liquor.

Any proposal to increase the minimum wage by any amount in any province seems to be met with dire warnings of big job losses and impending economic doom. In Alberta, the government’s actions have generated considerable public debate and some bold predictions.

In 2015, the Canadian Federation of Independent Business (CFIB) claimed that Alberta’s increase would cost the province “between $53,500 and $195,000 jobs.” In other words, the CFIB believed that as many as two-thirds of the 300,000 Alberta workers making less than $15 an hour could lose their jobs. In 2017, the C.D. Howe Institute claimed the increase to $15 by 2018 “could lead to the loss of roughly 25,000 jobs.”

History, however, doesn’t back up the critics’ sky-is-falling claims. In 2009, Hristos Doucouliagos and T.D. Stanley published a meta-study of 64 U.S. minimum wage studies, between 1972 and 2007. They concluded that minimum wage increases have no or a near-zero effect on employment.

In 2016, with the provincial economy still in recession, Alberta’s accommodation and food service sector, and wholesale and retail trade sector, where low-wage jobs are concentrated, added 7,600 jobs. In 2017, these two sectors added a further 17,400 jobs, for a total increase of 25,000 jobs across the two sectors in the last two years. These jobs were created despite the minimum wage increasing 33 per cent from 2015 to 2017.

The main reason doom-and-gloom predictions fail to materialize is because critics assume employment effects for teenagers also apply to workers over age 20. In reality, minimum-wage increases tend to result in a small percentage of teens losing their jobs, while losses for adult workers are effectively zero. This is because the vast majority of minimum-wage workers are necessary to businesses, and if employers must cut, they lay off their least experienced employees.

But roughly 75 per cent of Albertans making less than $15 an hour are not teenagers. In fact, 40 per cent are parents, and over 14,000 are single parents.

Critics also claim that raising the minimum wage isn’t an effective way to reduce poverty. The reality is that past minimum wage increases had no impact on poverty rates because they were too small, keeping full-time earnings below the poverty line.

For example, in 2013 Alberta’s minimum wage went up 20 cents to $9.95. Earning that wage for 35 hours a week for 52 weeks, a worker’s annual pre-tax income was $18,109. Canada’s 2013, after tax Low Income Cut-Off (the poverty line) for a single person with no children living in a city of at least 500,000 people was $19,744.

The 2016 poverty line (the latest one) for the same person was $20,675. At $15 an hour, a full-time worker’s annual pre-tax income is $27,300, so the $15 wage raises them above the poverty line. The worker sees a sizable net gain in income since they’ll pay little income tax (Alberta’s 2017 personal income tax exemption was $18,690).

Is Alberta’s minimum-wage increase causing economy-wide inflation, as some critics suggest? Absolutely not; inflation in Alberta is driven by the pace of oilsands development, not long-overdue minimum wage hikes. The inflation-adjusted average provincial minimum wage across Canada only went up a penny from 1975 to 2013. In 2019, a $15-wage, when adjusted for inflation, will only be about a dollar more than the 1977 minimum wage.

There are, in fact, many benefits to raising the minimum wage. It stimulates the local economy, because low-income earners spend most of their income, and chiefly in their community. Overall consumer spending power rises, as does the amount of money circulating in our economy. Meanwhile, a $15-minimum wage significantly boosts the income of low-wage workers as a group and slows down widening income inequality, especially as 63 per cent of Alberta low-wage workers are women.

Some claim Alberta’s economy, especially the hospitality sector, is too weak right now to support higher wages. But just last month, ATB Financial reported that Alberta “consumers are spending money at near record levels.” Higher minimum wages can even save taxpayers money. People on low incomes rely more on social services. As Finance Minister Joe Ceci has said, “There is almost a kind of subsidy going to private businesses through the charitable sector to keep people whole.”

All in all, minimum-wage hikes don’t hurt our economy, they help more working Albertans share in the province’s prosperity.

https://www.nationalobserver.com/2018/09/19/opinion/albertas-minimum-wage-hike-success
 

icespot

Well-known member
Jul 7, 2005
1,692
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I am a socialist and raising the minimum wage does not help Canadians or the economy.

I believe the best system is one like the one used in Germany. Where employees and employers sit on a board that over sees the company board of directors.
Giving the people the rite representation to obtain a fair wage, and not hurt the business in doing so.
 

oldjones

CanBarelyRe Member
Aug 18, 2001
24,495
11
38
I am a socialist and raising the minimum wage does not help Canadians or the economy.

I believe the best system is one like the one used in Germany. Where employees and employers sit on a board that over sees the company board of directors.
Giving the people the rite representation to obtain a fair wage, and not hurt the business in doing so.
However, until we have employers and employees behaving so reasonably on their own, we wind up needing governments to nudge them, one way or another.

People having and spending more money is the very definition of a more vigorous economy, and the ones receiving that raised minimum would certainly not support your view. It may well be that some businesses will have to raise their prices to survive, but so will their competitors, and with low-wage workers having more to spend, they should all see more money coming their way in the end.

Negotiating across a table as you describe is a far better approach than legislation, but for that to take hold, we have to begin with employers realizing having a union to deal with is a better bet than keeping unions out and having government impose stuff like safety standards, fair hiring and minimum wages and by law. Today's North American business lobby sees only the winner-take-all of having it both ways: No fair wages, and no unions.

So now and again, they get laws they don't like and the impact of that forced reality on their limited vision is way more painful than it ever needed to be.
 

nottyboi

Well-known member
May 14, 2008
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I wonder how many people voted for Ford that will lose out on the $1 wage hike? The beauty of wage hikes is a bunch of that money also ends up in the provincial treasury in tax revenues PLUS the spending boosts the economy.
 

Anbarandy

Bitter House****
Apr 27, 2006
10,087
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I wonder how many people voted for Ford that will lose out on the $1 wage hike? The beauty of wage hikes is a bunch of that money also ends up in the provincial treasury in tax revenues PLUS the spending boosts the economy.
Working people in Ontario have no better friend nor greater supporter than Rob Ford. How do I know this? It's because he repeatedly states this.

In fact he is so adamant that he has the foremost interests of working people at heart, so much so that he will repeal many facets of Bill 148 which strengthened workers rights in favor of business and corporate interests.

Ford says quashing the once scheduled $1/hr increase in the minimum wage will actually benefit low income workers because it will incentivize more companies to create more minimum wage jobs. Ford says it, so it must be true.

Listen to what Doug Ford says, not what he actually does or is going to do.

Once again folks, there is no better friend nor greater support of working people in Ontario, than the Great Doug Ford.

Long live our great leader Doug Ford.
 

Bud Plug

Sexual Appliance
Aug 17, 2001
5,069
0
0
I wonder how many people voted for Ford that will lose out on the $1 wage hike? The beauty of wage hikes is a bunch of that money also ends up in the provincial treasury in tax revenues PLUS the spending boosts the economy.
An increase in the minimum wage does not suddenly create more wealth to distribute within the economy. It redistributes wealth. It's true that low wage earners spend almost everything they earn. That's great for tax collection, considering the tax burden on this spending via income, HST, fuel, and other taxes. If that were the end of the analysis, the minimum wage law should be that employers have to pay employees every cent of gross profit earned by the business!

However, a healthy economy requires there to be other allocations of money, such as investment and savings. Low income people generally don't do either. They can't.

So every employer faced with higher minimum wages is faced with a choice:

1. Reduce employment so that the total spent on wages is the same (a neutral result for employers and the economy, but a negative result for at least some employees). This may or may not be operationally possible, depending on the business.

2. Raise prices to recover the additional costs - (a) if successful, really amounts to employees paying for their own raises, net neutral to them, but a net gain to tax coffers because of the additional spending on both sales and consumer spending by employees, (b) if unsuccessful, leads to lower sales and layoffs (same impact as 1).

3. Pay for the increased costs by reducing the investment/savings allocations of the business = short term gains for employees and tax coffers, but long term harm to the economy. In the long run, without investment, there is no employment.

In none of these scenarios do employees really come out ahead. All it amounts to is disruption to the business with no net benefit to employees when analyzed in both the short run and the long run.

There only two things that truly drive higher wages. The first is higher demand for an employer's goods or services. That, in turn, creates higher demand for employees and more money to apply towards meeting that increased demand. The second is higher productivity. However, the overall impact of higher productivity on the economy may not be positive if the GDP doesn't grow fast enough to absorb employees laid off due to productivity improvements.

Governments come up with minimum wage policies in part to address poverty reduction politics coming from those concerned with income distribution and partially to reduce government welfare and EI spending. Neither of these driving motivations really analyzes the full impact of manipulating wage rages in the short run, and most definitely not in the long run (governments rarely think beyond the next election). People should be wary of any government policy that attempts to manipulate the economy in such a specific way.
 

Anbarandy

Bitter House****
Apr 27, 2006
10,087
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^^^^^

Farkin hilarious!!!

Tell that to all those poor minimum wage workers who will be screwed out of $2000/year by Ford.

Tell that to all those poor workers who will screwed out of increased worker rights in Bill 148 that Ford will gut.

Mr. Elite Academia pontificating to the poor working class. You're too much Bud!!!
 

nottyboi

Well-known member
May 14, 2008
22,447
1,325
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An increase in the minimum wage does not suddenly create more wealth to distribute within the economy. It redistributes wealth. It's true that low wage earners spend almost everything they earn. That's great for tax collection, considering the tax burden on this spending via income, HST, fuel, and other taxes. If that were the end of the analysis, the minimum wage law should be that employers have to pay employees every cent of gross profit earned by the business!

However, a healthy economy requires there to be other allocations of money, such as investment and savings. Low income people generally don't do either. They can't.

So every employer faced with higher minimum wages is faced with a choice:

1. Reduce employment so that the total spent on wages is the same (a neutral result for employers and the economy, but a negative result for at least some employees). This may or may not be operationally possible, depending on the business.

2. Raise prices to recover the additional costs - (a) if successful, really amounts to employees paying for their own raises, net neutral to them, but a net gain to tax coffers because of the additional spending on both sales and consumer spending by employees, (b) if unsuccessful, leads to lower sales and layoffs (same impact as 1).

3. Pay for the increased costs by reducing the investment/savings allocations of the business = short term gains for employees and tax coffers, but long term harm to the economy. In the long run, without investment, there is no employment.

In none of these scenarios do employees really come out ahead. All it amounts to is disruption to the business with no net benefit to employees when analyzed in both the short run and the long run.

There only two things that truly drive higher wages. The first is higher demand for an employer's goods or services. That, in turn, creates higher demand for employees and more money to apply towards meeting that increased demand. The second is higher productivity. However, the overall impact of higher productivity on the economy may not be positive if the GDP doesn't grow fast enough to absorb employees laid off due to productivity improvements.

Governments come up with minimum wage policies in part to address poverty reduction politics coming from those concerned with income distribution and partially to reduce government welfare and EI spending. Neither of these driving motivations really analyzes the full impact of manipulating wage rages in the short run, and most definitely not in the long run (governments rarely think beyond the next election). People should be wary of any government policy that attempts to manipulate the economy in such a specific way.

Based on that thinking, we should all be serfs because it serves the economy the best. The wealth created by min wage people is no less real then that created by higher income people. You can argue lawyers do not create wealth, after all what do they produce. While Lilly at the grommet factory making min wage actually produced a product. The GDP is also based on spending, when you spend you also create wealth. When you go to a bar and pay $9 for a beer that cost $1 you created $8 of GDP. So yes it all creates wealth.
 

Bud Plug

Sexual Appliance
Aug 17, 2001
5,069
0
0
^^^^^

Farkin hilarious!!!

Tell that to all those poor minimum workers who will be screwed out of $2000/year by Ford.

Tell that to all those poor workers who will screwed out of increased worker rights in Bill 148 that Ford will gut.

Mr. Elite Academia pontificating to the poor working class. You're too much Bud!!!
So, no disagreement with any the points I raise -just frustration with the concept that there's no such thing as a magical way to create wealth.

You're right to this extent, it might be hard to explain this to someone who has never thought about how economies work. Do you count yourself among them? Or is your point only that you think your favorite political party can manipulate people who don't understand the economy?
 

nottyboi

Well-known member
May 14, 2008
22,447
1,325
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So, no disagreement with any the points I raise -just frustration with the concept that there's no such thing as a magical way to create wealth.

You're right to this extent, it might be hard to explain this to someone who has never thought about how economies work. Do you count yourself among them? Or is your point only that you think your favorite political party can manipulate people who don't understand the economy?
The data indicates none of 1 or 2 are happening so why :deadhorse: ? (in case unclear you are beating a dead horse)

In some cases businesses will reduce labour and automate, which is something they avoid doing when they have the crutch of cheap labour. If your business cannot support itself and pay a living wage, then either find a way to add more value or close up shop.
 

Bud Plug

Sexual Appliance
Aug 17, 2001
5,069
0
0
Based on that thinking, we should all be serfs because it serves the economy the best. The wealth created by min wage people is no less real then that created by higher income people. You can argue lawyers do not create wealth, after all what do they produce. While Lilly at the grommet factory making min wage actually produced a product. The GDP is also based on spending, when you spend you also create wealth. When you go to a bar and pay $9 for a beer that cost $1 you created $8 of GDP. So yes it all creates wealth.
Economies require goods and services. Making grommets is of no use if you can't transport them to market, ensure they meet manufacturing standards, engineer them in the first place, etc.

Clearly, you need to re-read my post. An economy requires work, productivity, employment, consumer spending, investment, savings, and quite a bit more besides. Not just any one or two of these.

Without minimum wages, employers decide how much to spend (on wages, materials, services, etc.) and how much to invest/save. Forcing them to pay more in wages via minimum wage increases may force them to invest less (see my 3 alternatives). Unless you have discovered a way to create employment and productivity without investment (and if you have, I want in on it!), the consequences I have mapped out are logically unavoidable.

By the way, since you mention serfs, do you know the real reason slavery ended in the West? Not because people suddenly became nicer or more moral, but because it was economically inefficient compared to paying people to work. So no, no one wants to go back to the feudal system. It didn't work as well as today's economy. For anyone (including the wealthy).
 

Bud Plug

Sexual Appliance
Aug 17, 2001
5,069
0
0
The data indicates none of 1 or 2 are happening so why :deadhorse: ? (in case unclear you are beating a dead horse)

In some cases businesses will reduce labour and automate, which is something they avoid doing when they have the crutch of cheap labour. If your business cannot support itself and pay a living wage, then either find a way to add more value or close up shop.
If the data truly showed that neither 1 nor 2 is happening, that means 3 is. And frankly, I think 3 is the worst result of all.
 

nottyboi

Well-known member
May 14, 2008
22,447
1,325
113
Economies require goods and services. Making grommets is of no use if you can't transport them to market, ensure they meet manufacturing standards, engineer them in the first place, etc.

Clearly, you need to re-read my post. An economy requires work, productivity, employment, consumer spending, investment, savings, and quite a bit more besides. Not just any one or two of these.

Without minimum wages, employers decide how much to spend (on wages, materials, services, etc.) and how much to invest/save. Forcing them to pay more in wages via minimum wage increases may force them to invest less (see my 3 alternatives). Unless you have discovered a way to create employment and productivity without investment (and if you have, I want in on it!), the consequences I have mapped out are logically unavoidable.

By the way, since you mention serfs, do you know the real reason slavery ended in the West? Not because people suddenly became nicer or more moral, but because it was economically inefficient compared to paying people to work. So no, no one wants to go back to the feudal system. It didn't work as well as today's economy. For anyone (including the wealthy).
Sure but this definitely increases consumer spending, it may increase productivity as labour is used more efficiently due to higher cost, and will result in more goods and services produced as demand is increased. Savings and investment will also increase as those min wage people will now have to either buy RRSPs or pay taxes!!!

Paying mor for labour may also force them to invest MORE to make said labor more productive
 

JohnLarue

Well-known member
Jan 19, 2005
16,156
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Based on that thinking, we should all be serfs because it serves the economy the best.
Your conclusion is wrong. Bud Plugs analysis was accurate & covers most scenarios.
Except for the one where business owner closes the doors because of the increase in his costs. Then everyone loses. More than a few restaurants closed shop when the wage went up in 2017

The wealth created by min wage people is no less real then that created by higher income people.
As Bud Plug pointed out they do not save nor do they invest and I will add they do not hire any employees, But higher income people do
So again you dead wrong when you equate wealth created with the incremental $ of Min wage people vs. higher income people
Higher income people direct a higher portion of the incremental $ to activities with much higher economic multipliers via savings, investing and hiring others
You can argue lawyers do not create wealth, after all what do they produce.
They ensure legal contacts such as bill of sale & transfer of ownership can be transacted quickly & with a high degree of confidence for both parties, They also facilitate a definitive conclusion if there is a despite.
Try running an economy without these three things in place


While Lilly at the grommet factory making min wage actually produced a product.
If a customer does not pay for goods or services delivered in good faith are you going to throw a grommet at them or will you call your lawyer?


The GDP is also based on spending, when you spend you also create wealth. When you go to a bar and pay $9 for a beer that cost $1 you created $8 of GDP. So yes it all creates wealth.
That argument neither supports or refutes the case for Min Wage hikes, unless of course the owner had to close the bar because of the hikes
 

JohnLarue

Well-known member
Jan 19, 2005
16,156
2,147
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If your business cannot support itself and pay a living wage, then either find a way to add more value or close up shop.
Close up shop with youth unemployment an ongoing issue?
You do not think these issues through do you?


Do you employ 20-30 people and worry every night about meeting the next payroll?
Have you ever borrowed $10-20K to make sure your employees had confidence they will always get paid?
What right do you have to pass judgement on how a business operates?
 

K Douglas

Half Man Half Amazing
Jan 5, 2005
26,131
6,340
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Room 112
I wonder how many people voted for Ford that will lose out on the $1 wage hike? The beauty of wage hikes is a bunch of that money also ends up in the provincial treasury in tax revenues PLUS the spending boosts the economy.
You mean the same ones that have actually lost because their job was either eliminated or their hours were cut?
 

K Douglas

Half Man Half Amazing
Jan 5, 2005
26,131
6,340
113
Room 112
Alberta's minimum wage is about 1% higher than the national average. For decades it was always below the national average. The NDP will be thoroughly crushed in the next provincial election that is for damn sure.
 

Malibuk

Well-known member
Jan 9, 2017
1,127
270
83
The reality is that there are many people who do not deserve $14 per hour for the job that they do so why should their company be forced to pay them $15?
A lot of companies are getting killed by having to dramatically raise their prices.

The 2 restaurants where I often went for lunch have both gone out of business.
Some others have significantly raised their prices and are not even remotely close to being as busy as before.

Some people may make a little more money but everybody ends up paying a lot more for almost everything they buy.
 
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