On Saturday, April 25, the Calgary Herald published an editorial entitled “Notley’s overreach,” which applauded the NDP leader’s performance in Thursday night’s debate, but chided her for a promise to raise Alberta’s minimum wage to $15 within three years.
Claiming such a policy would kill jobs and “cause maximum damage” to the economy, the editorial concluded it would be a “reckless prescription” for Alberta.
The editorial cites a 2011 study by the Canadian Federation of Independent Business as the basis for its claim that a higher minimum wage would kill jobs. However, a more recent study from the Canadian Centre for Policy Alternatives in 2014 found little correlation between the minimum wage and employment. That study found demand was the critical factor in determining labour market performance, and higher wages of course lead to more demand for consumer products.
Other studies have produced similar results, and it is worth noting that the CFIB is a lobby group representing the employers who would have to pay a higher minimum wage.
Minimum wage isn’t just for teens
The editorial goes on to argue that most people earning minimum wage are young people living with their parents. Again, this assertion is not entirely supported by the available data.
According to Statistics Canada, in 2009 more than 40 per cent of minimum wage workers were over the age of 25, and the vast majority were women. Many are parents, and single parents. So yes, many minimum wage workers are young, but many are not. Rather than being a transitional wage, the minimum wage is increasingly becoming permanent, particularly for women and minorities.
Finally, the editorial warns that “raising the minimum wage to $15 would create pressure to hike the rates of similarly paid employees.” It suggests that this is likely to lead to inflation and closure of businesses.
Here, we must confess to finding the editorial position confusing. Does the newspaper oppose increases in wages generally? Or only increases to the wages of those earning the least?
Many economists, such as Nobel winner Paul Krugman and John Schmitt, senior economist at the Center for Economic and Policy Research in Washington, D.C., advocate just such an increase to the minimum wage as a means of stimulating and strengthening the economy.
Better wages, better workers
We crunched some numbers from a pioneer of paying workers better to get better work: Henry Ford. In 1914 he doubled the going industrial wage to $5 per day. That amounted to $1,300 per year, up from about $600 per year for autoworkers and half that for steelworkers.
Accounting for inflation, $1,300 in 1914 is equivalent to around $31,000 per year in today’s U.S. dollars. At 40 hours per week, $15 per hour amounts to $31,200 annually.
So when Henry Ford, icon of capitalism, pulled his workers out of poverty he did it with a minimum wage that is, oddly enough, almost exactly the same as that in Rachel Notley’s proposal. In retrospect, Ford described it as “the greatest cost-cutting move I ever made,” claiming it had reduced turnover and absenteeism, increased worker loyalty and significantly boosted sales (to his own workers and to others, as employers had to raise their wages to compete with his factories).
Other North American jurisdictions, such as the city of Seattle, have recently adopted a $15 per hour minimum wage, and this call for raising the wage floor has now been taken up by groups across Canada.
As the debate continues in Alberta, we believe these are facts worth considering.