24
October
2018
|
22:08
Europe/Amsterdam

COMMENTARY || Is a $15 minimum wage worth it? Here’s what the numbers say

Different experiences with similar wage hikes in Alberta and B.C. suggest Ontario’s decision to stop at $14 was both right and wrong, say economists.

By JOSEPH MARCHAND and DAVID GREEN

On Tuesday, Sept. 25, there were three provinces that had a $15 minimum wage scheduled to come into effect: Alberta (by 2018), Ontario (by 2019), and British Columbia (by 2021). By Wednesday, Sept. 26, there were only two, Alberta and British Columbia, as Ontario decided to halt its scheduled minimum wage increases one dollar short of that goal.

As two labour economists, each with an independent policy piece on the possible effects of the $15 minimum wage in our provinces (British Columbia for David Green, published by the Canadian Centre for Policy Alternatives in April 2015, and Alberta for Joseph Marchand, published by the C.D. Howe Institute in September 2017), we represent the two remaining cases.

We each analyzed the effects of virtually the same nominal increase of 46 per cent and 47 per cent, as British Columbia’s proposed plan in 2015 was a move from $10.25 to $15 an hour and Alberta’s plan enacted in 2015 was a move from $10.20 to $15 an hour by Oct. 1, 2018. B.C. has since made the goal of a $15 minimum wage a reality (rising in September 2017 to $11.25 and going to $15.20 by 2021).

We then agreed as to the average potential employment loss from these wage increases. Our calculations show a 7.6 per cent to eight per cent loss among affected workers (that is, those initially working below $15 or those of younger ages) and a 0.98 per cent to 1.04 per cent loss in total employment. This translates to about 23,000 to 26,000 jobs lost in each province, with similarly sized labour forces.

Ontario, with its smaller minimum wage increase of 31 per cent ($11.40 in 2016 to $15 by 2019), would have been expecting a smaller percentage loss in employment. But with a labour force more than three times the size of that of Alberta or B.C., this would have translated to a larger job loss count. By stopping $1 short of its $15 goal, Ontario presumably shielded itself from some of that loss.

So, was the postponement of Ontario’s $15 minimum wage the right or wrong thing to do? Was its policy decision a good or bad one? We discuss a few broader points to help answer that.

First, sound methodology should be a point of agreement regardless of any policy conclusions. Methodological questions should be kept separate from policy discussions that follow in order to provide a sound basis for those discussions. For Alberta and B.C., we agree on methodology and the implied employment conclusions. Ontario’s job projections should be similarly viewed.

That said, both of our studies went beyond a job-loss calculation. For B.C., Mr. Green highlighted the benefits of reduced employee turnover and a more equitable distribution. For Alberta, Mr. Marchand highlighted the concerns of poor timing owing to the energy bust and the prioritization of wages while employment was a pressing issue. Those wider scopes help to set up our next point.

Second, any policy comes with costs. The prediction that minimum wage increases will have employment effects is not a sufficient argument in itself not to implement the increases. There are many factors to consider. Whether the wage increases should be implemented depends on analyses of accompanying costs and benefits and, potentially, on the state of the economy.

For example, from April 2015 (prior to Alberta’s policy), to mid-2018, the total employment rate has gone up by two percentage points in B.C. and dropped by two percentage points in Alberta. For young workers (between the ages of 15 and 24), their employment rate has gone up five percentage points in B.C. and gone down by five percentage points in Alberta. Given these opposite trends, actual job loss may occur in Alberta and only shave off growth in B.C.

Third, reasonable people can disagree on some of the factors that determine the ultimate advisability of a minimum wage increase. And the same person might see it as advisable in some cases but not in others. However, it is important not to politicize the main empirical findings themselves in order to permit a mature discussion, which we believe is achievable.

Given the different focus of each of our studies and the state of the economy in each province, Mr. Green’s outlook for B.C. was somewhat more optimistic and Mr. Marchand’s outlook for Alberta was somewhat more pessimistic. So again, was Ontario right or wrong in pressing the brakes on their minimum wage at $14? Our simple answer would have to be neither—it’s both.


Joseph Marchand is an associate professor of economics in the Department of Economics at the University of Alberta. David Green is director and professor of economics in the Vancouver School of Economics at the University of British Columbia.

This opinion-editorial was originally published Oct. 15 in The Globe and Mail.