Province pursues commitment to reaching $15 an hour by 2018
Despite having one of the strongest economies in Canada, for many decades Alberta had the lowest minimum wage in the country, something the NDP government looks to change by making incremental hikes to the minimum wage to reach $15 per hour by fall 2018.
While this may be a welcome change to employees earning the current minimum wage of $11.20, many employers feel this adjustment could hurt their business, or potentially lead to layoffs.
Inevitably, groups supporting either side of the debate come to their own conclusions, citing research that indicates strong positive or negative effects of wage hikes. This debate is not an easy one, and the impacts will not be felt immediately.
On one hand, the case to raise the minimum wage has a compelling social benefit: thousands of Albertans struggle, and sometimes fail, to make ends meet on a minimum wage salary.
“For me, as a long-time fair wage advocate, it boils down to a moral argument,” says Gil McGowan, president of the Alberta Federation of Labour (AFL). “Those of us who support a $15 per hour minimum wage make the argument that anyone working full time should be able to live above the poverty line.”
Matt Blais, an employee with a car rental agency in Calgary, says that while he was able to live earning the old minimum wage, his recent raise to $15 an hour has greatly improved his sense of financial stability.
“It was tough before I got my raise. I had to convince my landlord to lower my rent, but I was able to make ends meet even if it was a little stressful sometimes,” he said. “After my raise though things have been way better, obviously. I can buy better food, I’m not constantly worried I won’t be able to pay my bills. It’s not a ton of extra money honestly, but it helps.”
Opponents of the wage increase, however, cite research showing businesses may freeze hiring or lay off employees in response to wage pressures created by this increase.
“Right now, Alberta’s economy is facing one of the worst recessionary downturns of a generation. And small business owners are feeling a lot of pressures, just as it is,” says Amber Ruddy, Alberta president of the Canadian Federation of Independent Businesses (CFIB). “About one in three small business owners are looking to lay off staff in the next three months. So when you start adding on wage pressures and tax costs, small businesses are pinched and the wage increase is going to hurt the people it’s trying to help.”
Brad Pallister, co-owner of a small fishing equipment store in Lacombe, told the CBC, “If you are unable to find a way to bring in more money, you must decide to make cuts instead. This scenario is what small businesses fear most.”
Though both sides of the debate support their argument with research, McGowan and the AFL believe that some employer groups are not being fully transparent with their data.
“Some employer groups have grossly distorted the available research,” he says. “For example, they found one study based on research from more than 15 years ago suggesting there might be a small negative effect on the employment of teenagers and took that one study and this very small negative impact on one group of workers and they extrapolated it across the economy.”
Indeed, lobbying groups often present their data in a very selective fashion. For example, the CFIB quotes a government briefing on its website as indicating “significant job loss” could be a “realistic possibility” of minimum wage increases. However, within the same document researchers gathered much evidence to suggest this is an out-dated assumption, stating, “other studies have concluded just the opposite and concluded there is no significant causal linkage between minimum wage increases and employment levels.”
In fact, the same document suggests there is “a positive linkage, theorizing that changes in minimum wage policy can promote virtuous cycles of local consumption productivity and employee retention” that could improve employment and even stimulate the economy.
However, the reality is that both possibilities presented by research are simply predictions based on available data. Ruddy and the CFIB believe the province should not be making major economic decisions like raising the minimum wage without concrete data.
“If there is conflicted data and this government claims to be evidence based, why are we rolling full steam ahead on an aggressive policy experiment if the data is so conflicted? We don’t need this kind of experiment right now,” she said.
However, proponents believe that economic models developed to predict the effect of these kind of wage increases in Alberta provide a solid base of evidence to support the $15 minimum wage.
“The idea that a higher minimum wage can actually stimulate the economy and create jobs is not a radical notion,” McGowan said. “It’s something that’s been accepted by mainstream economists for years. It’s not going to pull us out of recession by itself, but it will get us a bit closer.”
This idea is supported by research undertaken by the AFL in partnership with Angella MacEwen, senior economist with the Canadian Labour Congress, and with the Federal Reserve Bank of Chicago.
The bank had developed a model to estimate economic stimulus provided by wage increases, which MacEwen adjusted and applied to the Alberta context. Though only a hypothesis, the data presented a strong possibility for a stimulative effect on the local economy.
“The results of her research are that a move to a $15 minimum wage would have the effect of boosting the Alberta economy by nearly a billion dollars over the next three years, driven almost exclusively by increased consumer power for low wage workers,” McGowan said.
Opponents of the minimum wage increases, such as the CFIB, maintain that $15 an hour is a somewhat arbitrary number, based off of evidence from other markets, and may not be the best or only option to help low wage earners.
“Its funny that we’re putting this arbitrary $15 wage as the goal, because its based on what is happening in the U.S., and a lot of the American examples are not getting there over such a short period of time,” said Ruddy, Alberta president of the CFIB. “As your paycheque goes up, so does the percentage of those various taxes that come off of your paycheque. If the government actually wanted to let people keep more of their money, they would provide a higher base personal exemption, so people can keep all of their earnings if they are in a low income situation.”
Regardless, the Alberta government has shown a commitment to going through with its promise of raising the minimum wage to $15 an hour by 2018. The next increase of $1 is scheduled for October, followed by $1.40 increases in 2017 and 2018.
Thumbnail image by Chris Schwartz