Wednesday, October 6, 2010

Minimum wage increase will hurt more than it will help

The BC government is debating raising the minimum wage. I understand that everyone wants to help the poor, and getting them higher wages seems like a good way to do it. The problem is that it simply does not work that way.

Niels Veldhuis and Amela Karabegovic explain why not:

Next, consider the claim that the minimum wage needs to be increased to raise the income of society's low-income workers. While this claim certainly appeals to the emotions, the typical minimum wage earner is not the person depicted by advocates of minimum wage hikes.
Data from Statistics Canada reveal that 59 per cent of minimum wage workers are 15 to 24 years old, and most of them (93 per cent) live at home with family. Many of the remaining individuals earning minimum wages are adults supplementing their family income with part-time work during child-rearing years or after retirement.

Additionally, workers earning minimum wage are not the same people who earned the minimum wage a year or two ago, since minimum wage work is largely temporary. The vast majority of minimum wage earners quickly experience upward income mobility. Research shows that after two years, more than 80 per cent of minimum wage workers earn more than the minimum, with a typical wage gain of about 20 per cent.

Herein lies the main problem with minimum wage increases. Employers respond by reducing the number of workers they employ and/or the number of hours their employees work. Consequently, minimum wage increases take away opportunities for low-skilled workers and young people to enter the workforce, gain experience and move up the income ladder.


A fast food job is a great first job to have. It teaches you a lot of the basic skills that you will need in any work place (such as patience). If the BC government really wants to help it should eliminate the minimum wage and thus create more jobs.

1 comments:

johndoe124 said...

Indeed. Moreover, why should I not be able to work at less than minimum wage if I so desire?

Funny thing about politicians, they think the ability to get elected makes them economists, social scientists, civil engineers, climate change scientists, etc., yet all they are really good at is scamming.