A higher minimum wage won’t kill jobs.
At least that’s what the Alberta Federation of Labour (AFL) and the Parkland Institute at the University of Alberta are saying based on their studies of other cities and the data coming from previous minimum wage increases.
The minimum wage increase to $15/hour hits the province on Oct. 1, despite small businesses petitioning for a freeze in the upcoming hike, according to the Canadian Federation of Independent Business (CFIB).
Eighty-nine per cent of Alberta business owners surveyed by the CFIB urged the provincial government to freeze minimum wage at the current price of $13.60/hour.
“What we have seen is that Alberta was clearly in a really, really bad recession and singular to Alberta. I mean the effects of the collapse of the oil price really hit Alberta more than any other place, even other oil jurisdictions in Canada,” said Trevor Harrison, director of the Parkland Institute at University of Alberta.
Alberta’s minimum wage rose from $12.20 on Oct. 1, 2016, to $13.60 on Oct. 1, 2017.
“Arguably, the raising of minimum [wage], along with a series of other things that the NDP government did, [was] basically to keep up demand in the economy. I think that actually did allow Alberta to ride out the recession much better than it might have otherwise,” said Harrison.
He added that while there is a problem with the province’s increased deficits and accumulation of debt, “people will argue back and forth with how the best way to deal with that,” but not raising Alberta’s minimum wage would’ve left the province worse off.
“The absolute worst way of dealing with a recession would’ve been to have massive layoffs, massive cuts in the public service, not increasing rates for people who actually need the money, because again that would’ve simply added to the recessions, in fact really made it much worse. Because again, you would’ve been decreasing demand in the system,” said Harrison.
Looking into data from the 1970s, when another large minimum wage increase was put in place similar to what’s been happening currently, Siobhan Vipond, secretary-treasurer of the AFL, has seen confirmation that the same pattern of growth is occurring.
“We also had big jumps back in the 70s as well, percentage-wise, which means we’re expecting the same things. People who work in the province will have additional money in their pocket,” said Vipond. “And they will spend that money locally, and we’ll see what we’ve seen right now which is the economy is continuing to grow and small businesses are continuing to increase in terms of their revenue and that’s because people have money to spend.”
Harrison pointed out the past data shows very little job losses overall, and the minimum wage increase is important to keep up with inflation in the economy. But, the unemployment rate in Calgary is still high, sitting at 7.9 per cent last month.
“Minimum wage in most jurisdictions tend to end up lagging behind the actual inflation rate, which is a problem for people at the low end of incomes. They’re constantly seeing their real incomes eroded by inflation and so raising the minimum wage is one way of actually trying to protect against the inflation that exists in the economy.”
Vipond said that the fear tactics and the arguments against minimum wage combined with misinformation of who earns a minimum wage leaves less opportunity to look into the facts.
“‘Oh no, there’s going to be massive layoffs and businesses are going to go out of business’, that’s not what happens. It’s because businesses react, smart businesses.”
The research from AFL found some small business owners pay more than the minimum wage already, while the big box stores are more often sticking to the lowest amount.
“We’re a consumer province, we all like to go shopping, we all like to spend our money. But those big box stores are all taking money outside of our economy with the profits, and if they’re doing that on the backs of paying people a poverty wage, I think it is a responsible way to deal with our economy, is to say our minimum wage rising will help the economy and that’s what the evidence has shown.” says Vipond.
Both the AFL and the Parkland Institute have looked at other places that have also raised minimum wage, such as Seattle, New York, and California.
Most of the provinces have minimum wage increases planned in the near future. Graph by Casey Richardson.
“We are leading the way in terms of the $15-mark. Of course we live in a province with the highest wages in Canada, so it makes sense that we’re ahead of the curve there because our section of wages should match that, because when you’re a low-income earner in a more expensive province, it has a bigger impact on you and your family,” said Vipond.
The majority of low-income earners in the province are over 25, women, parents or single-parents and many are from marginalized communities, according to the AFL.
“Low wage earners spend their wage locally, they’re not putting their money in the foreign housing market, they’re not putting their money in a bank, they’re not,” said Vipond. “So it’s very good for us when we have more people being able to spend money in local grocery stores, local restaurants, and just our local community, that’s good for everybody.
Alberta has been lacking in economic demand, meaning that while there are people who desire goods or services, they don’t actually have the money to pay for it.
“What we actually know about people who are in the poorest wage categories is they don’t stick the money that they earn in a sock and let it just sit there, they go out and they actually spend it right away, which is actually what you really want in the economy,” said Harrison.
One of the large economic effects of raising the minimum wage is putting more income in the hands of individuals who will spend it locally. However, the fine dining restaurant The Belvedere didn’t find this to be true after being open for 19 years, and seeing the decline start in 2015. In a report by Global News, the rising minimum wage, faltering economy and increased liquor taxes had taken too hard a toll for The Belvedere to remain open.
“A lot of people only concentrate on their own personal circumstance, not realizing how their own personal circumstance is tied to larger factors. For example, the small business owner that says, ‘I can’t afford to pay X amount of dollars more to my workers’, what that person is actually forgetting is that somewhere down the street, someone else is also paying an increased wage to someone,” said Harrison.
Vipond adds: “It’s very good for us when we have more people being able to spend money in local grocery stores, local restaurants, and just our local community, that’s good for everybody. It’s kind of that idea where [Henry] Ford had the whole idea where he was like, ‘I need my employees to be able to buy a car from me’, and that’s the same thing. We can’t have people who can’t afford to spend the money in terms of where they’re working.
“Retention is a very important key to running a smart business and you’re not going to retain your staff if you’re not treating them well, and wages are part of that. But the amount of money you save by retention is huge, so the turnover is a very expensive business model.”
Any wages falling below the $15/hour are considered a poverty wage in Alberta.
“For example, clearly within Alberta it’s very different from Newfoundland or New Brunswick, and given the relatively high wage rate even today, post-recession, people who are on minimum wage are that much more disadvantaged compared with other people who are within their own communities,” said Harrison.
Economic changes don’t “happen in three months,” said Vipond. “These things take half a year, or a year, so we would expect that this would be reasonable but we would also think it’s reasonable as a province that this needs to be looked at [on] a regular basis.”
Although a few small businesses in Calgary have closed or shut down secondary locations, such as Screamfest hosting it’s last event this year, stating in a report by Global News that the wage increase changes their market.
“So are we saying by that that those businesses that go out of business, the only reason they could survive is because they had incredibly cheap labour. But many of those businesses have had certainly time to prepare for this,” said Harrison. “If they have to pass on the cost, which again are pretty minimal for wages, were not taking here $25-$30 an hour, then so be it, because presumably, their customers are also able to pay for that fairly minor amount of increase in the overall wage portion of it.”
“What are people going to do?,” Vipond said. “Are they going to lay a whole bunch of their employees off or are they going to charge 15 more cents a coffee? I would argue most people are just going to charge 15 more cents for coffee and although we can talk about how yes, pricing is expensive, [for] a lot of people, 15 cents is not the difference between having a coffee or not.”
The Bears Den Restaurant & Lounge closed in January, blaming the increased wages and holiday pay. In a report from CTV News, Scott Winograd, General Manager and Co-proprietor, said that prices would have to be raised 30 per cent to break even, which would end up turning away customers.
Between July 2018 and July 2017, 25,700 jobs in the service sector were lost, according to City of Calgary data, including 8,800 in food and accommodation services, which had the worst job losses.
Both Vipond and Harrison have seen the reports and coverage that wage increases automatically mean businesses shutting down, fewer jobs and hours for employees, and a possible slow down in the economy.
“But what the media has missed out on is paying attention to the larger spread effects of minimum wage on the economy and not bringing back to the individual situation of the small operators and how they might ultimately benefit from this,” said Harrison.
“I think there should be a balance [in] reporting this and let’s always remember who we’re talking about. We’re talking about people who deserve a minimum wage,” said Vipond.
Editor: Ian Tennant | itennant@mtroyal.ca