Last week, I participated in the Atlantic Provinces Economic Council panel discussion asking the question; what is the right minimum wage for Atlantic Canada? Certainly, one way to get to good public policy is asking the right question. Asking what the right minimum wage for the region is a fair academic question, but we should also be asking is; what are we trying to achieve?
In the last year or two, we’ve been witness to a barrage offensive from organized labour pushing for a $15 dollar minimum wage as a poverty reduction tool. It has turned the debate into a binary discussion pitting employees against employers which play well in the media but generates a great deal more heat than light.
If our objective is reducing poverty, improving workforce participation and provide greater opportunities for lower income earners, increasing the minimum wage is simply the wrong tool. Yes, it may seem like a simple solution, but complex problems don’t often come with easy answers.
Employees are also the only winners and losers in this scenario as businesses will adjust to the new reality. They will either be reducing staff, hours, and benefits, increase prices or in some cases, change their model or close altogether.
Yes, there are well-intentioned objectives behind the arguments for increasing the minimum wage. Elevating the standard of living for low-income earners is obvious, but if in the process we reduce opportunities for our youth and other lower skilled people trying to enter the workforce, are we any further ahead?
Too high a minimum wage will become a hurdle rather than an on-ramp for young people entering the workforce. Employers, along with reducing job numbers, will move to find more experienced, higher skilled labour leaving behind those with entry-level skills. Raising the cost of labour does not make it more valuable and business will always balance the value of labour against that cost.
Too low a minimum wage will simply discourage workforce participation.
This is why we need to carefully look for the right minimum wage for Atlantic Canada. So, here are some questions we need to ask before arbitrarily posting a wage floor at $15.
Is the minimum wage the best policy lever to use to meet these objectives? Are there other, more precise instruments we can use to provide the most impact for those most in need such as improving the Working Income Tax Benefit or enhancing skills training?
Should there be a uniform minimum wage or should that wage be reflective of economic capacity in individual regions or sectors?
Recently, the Council of Atlantic Premiers, as part of a larger effort to align the Atlantic Provinces regulatory framework, put forward the idea of harmonizing the minimum wage throughout the region.
From a workforce mobility perspective, there may be some good reason to do this, but governments would be well advised to do their homework. While the higher wages in large urban centres may be supportable, a high minimum wage could spell disaster for many small businesses in rural areas or certain sectors with very different economic conditions.
However, we get there, reducing poverty and improving conditions for low-income earners needs to be done carefully and with a laser focus on what government is trying to achieve.
For the private sector, it must be done with predictability and with sufficient time to adjust. Complex problems rarely have simple answers. What we need to be doing on minimum wage is asking the right questions. We should also be watching the Ontario experiment very carefully to ensure we aren’t subjected here to the many very difficult lessons small businesses are learning there.
Jordi Morgan is Vice President, Atlantic for the Canadian Federation of Independent Business