TO $15, AND THEN A LIVING WAGE

NEWFOUNDLAND AND LABRADOR has nearly the lowest minimum wage in Canada, at $11.15 per hour. Fewer than 6 per cent of Canadians live in jurisdictions with a lower minimum wage.

Common Front NL calls for the province to adopt a $15 per hour minimum wage, in line with other jurisdictions that are moving forward on minimum wages, including Alberta, B.C., and Ontario, representing more than two thirds of Canadians.

$15 per hour is not a final destination on this path. It’s a good start. The minimum wage needs to be at a living wage level — a level that can help lift people out of poverty and reduce inequality.

Effects of a higher minimum wage

Significantly increasing the minimum wage will help to reduce poverty and inequality. It will raise the income of thousands of Newfoundlanders and Labradorians who work at minimum wage or a bit above it. It will help to reduce the gender wage gap, as the majority of minimum wage earners are women.

Lower income people whose wages are raised spend almost all of the increase, boosting local businesses. A $15 minimum wage in Newfoundland and Labrador will result in low wage workers having on the order of $100 million more per year more in their pockets to spend in local businesses. It will also help to boost tax revenues, and reduce the cost of income assistance. Rightly, the majority of Canadians (63 per cent) — and especially Atlantic Canadians (73 per cent) — support a $15 minimum wage.

Poverty, inequality, and the effects of a minimum wage increase

Newfoundland and Labrador has among the highest GDP per capita of Canada’s provinces. And yet we also have tens of thousands living in poverty; we are tied for worst province. Poverty increases the costs of health care, emergency services, and the social safety net more broadly. It costs money that could be spent boosting productive economic activity, and it drags down economic growth.

We also have the worst level of inequality in all of Atlantic Canada, and the province scored a D minus for its gender wage gap — the worst in Canada. Even in rich jurisdictions, inequality is associated with significantly worse outcomes for child well-being, educational attainment, teenage pregnancies, obesity, drug abuse, physical and mental health, trust and community life, social mobility, violence, and imprisonment levels.

Minimum wages are rising elsewhere

Six Canadian provinces and territories have already announced minimum wage increases for Spring 2018, and more are coming later in the year and in early 2019. By early 2019, the average minimum wage for Canadians will be approximately $13.50.

$15 per hour has been adopted as a goal by anti-poverty organizations, labour unions, and others. Some governments have already stepped up to the plate. Indeed, over 60 per cent of Canadians will soon live in provinces where they are protected by a minimum wage of $15 or more; Alberta, B.C., and Ontario have all announced their $15+ targets.

FAIRNESS AND THE MINIMUM WAGE

NEWFOUNDLAND AND LABRADOR has nearly the lowest minimum wage in Canada, at $11.15 per hour. It is a poverty-level wage. Less than six percent of Canadians live in jurisdictions with a lower minimum wage.

We have among the highest GDP per capita of Canada’s provinces. And yet we are among the worst in Canada for poverty and inequality, and are worst for the gender wage gap.

Poverty and inequality affect everyone, and not just the poor. They cause social and health problems, and drag down economic growth. Many living in poverty are actually working, but their wages are too low. Food banks are noting increasing usage by the working poor.

Significantly increasing the minimum wage will help to reduce poverty and inequality. It will raise the income of thousands who work at minimum wage (the majority of whom are women, and people over 20), and many of those earning just above it.

Lower income people whose wages are raised spend almost all of the increase, boosting economic growth and tax revenues, while reducing the cost of income assistance.

The above reasons, and moreover a greater sense of fairness, may explain why the majority of Canadians (63 per cent) — especially Atlantic Canadians (73 per cent) — support a $15 minimum wage.

Myths and Facts

Myth: “We don’t need minimum wage increases because most minimum wage earners are teenagers and students.”

Reality:

  • While many minimum wage earners are young, the majority are 20 or over.
  • 79% are not students.
  • The majority are women.
  • We want young people to stay in this province. Most other provinces have higher minimum wages.

SMALL BUSINESS AND THE MINIMUM WAGE

WHAT THE MAINSTREAM MEDIA likes to cover is conflict, because it gets them more views and more advertising dollars. So most media stories on small business and the minimum wage tend to say “small businesses hate minimum wages.” No doubt some do, but others don’t.

The reality is that small businesses can benefit from minimum wages. When minimum wages rise, thousands of workers have more money in their pockets, and spend it, e.g., buying groceries, clothes for their kids, and the occasional evening out. A lot of this additional spending helps local, small businesses.

Raising the minimum wage also helps to reduce poverty and inequality, which are both associated with slower economic growth. Boosting economic growth helps small businesses (and large businesses).

Reducing poverty also helps to reduce the demand for tax-funded social services and social assistance payments, helping to keep tax costs down for small businesses, as well as for their suppliers and customers.

Myths and facts about minimum wages and small businesses:

Myth: “Most minimum wage earners work for small businesses, and small businesses will be driven out of business by minimum wage increases.”

Reality:

  • Most minimum wage earners work for businesses with over 20 employees, or even 100 employees.

UNEMPLOYMENT AND THE MINIMUM WAGE

BIG BUSINESSES THAT PAY MINIMUM WAGES are the most persistent opponents of minimum wages. They like to stay in the background, and put other people in the foreground — like workers.

Now, obviously minimum wage increases help workers who are paid the minimum wage and those a bit above. So the opponents claim that other workers are hurt. But the evidence does not support that claim.

Below are some of the ways that opponents make that argument, and some facts in response.

Myth: “A higher minimum wage will cause employers to adopt automation to replace low-wage workers”

Reality: Restaurants, retail, and other sectors have been automating for years, without minimum wage increases. The businesses that have the greatest financial incentive to automate are actually those that pay high wages.

Automation: a year before a minimum wage increase was announced.

Myth: “Minimum wage increases cause unemployment – it’s just economics 101”

Reality: Real economies don’t follow simplified economic models; they are far more complex. There are many ways that businesses adjust to increased minimum wages; economists call these “adjustment channels.”

Real-life experience shows that there is little to no impact on employment from minimum wage increases (see the full backgrounder paper. The Canadian experience backs this up, as shown below.

Myth: “The provinces with the highest minimum wages have high unemployment.”

Reality: The provinces with the highest minimum wages have relatively low unemployment rates.

ECONOMIC AND EMPLOYMENT IMPACTS OF SPENDING CUTS

GOVERNMENT SPENDING CUTS have impacts on employment that go well beyond the size of the public service. Government spending cuts adversely affect private businesses, potentially causing some to fail. They put private sector workers out of a job.

Government spending cuts adversely affect private businesses, potentially causing some to fail.

Just as spending has a multiplier effect, creating jobs and GDP growth elsewhere in the economy, cuts have impacts elsewhere in the economy. The “indirect” impacts of spending or cuts affect sectors that supply government. The employees in those in- directly affected sectors, and government employees, spend their money in other.

Induced multipliers are not published by the government. However, based on other multipliers, it is possible to come up with order-of-magnitude estimates.

Depending on where cuts made, for every 10 public service jobs cut, the province would lose roughly 5 jobs in the private sector.

As illustrated in Figure 4, oil and gas extraction creates very few jobs per dollar invested. Educational services, health care, and social assistance create far more. At the same time, cuts to education, health care, social assistance, and other government functions result in significant job losses — both in the public and private sectors.

How many jobs would be lost if the government cuts spending significantly? The following are estimates of the combined direct and indirect job losses in the public and private sectors from cuts to public spending:

  • 3% of spending: around 3,500 jobs
  • 10% of spending: around 11,600 jobs
  • 30% of spending: around 35,000 jobs

Note that this does not include the induced job losses, so there would be additional jobs lost in local businesses due to lower individual spending.

DOWNLOAD FULL FACT SHEETS

LINKS TO COMPLETED FACT SHEETS