The government is gradually increasing Alberta’s minimum wage from $10.20 in Oct 2015 and to a cap of $15/hour in Oct 2018. Fifteen bucks an hour. This increase is not going to land anyone in the lap of luxury–$15/hour is $3.14/hour below the living wage for Calgary which currently sits at $18.15—and yet some Albertans are fighting the increase.
It’s unnecessary and bad for the economy
Critics oppose the increase because:
- It’s wasted on the kids: Not so. Only 30% of the Albertans working for less than $15/hour are teenagers, almost 50% of the people earning less than the new minimum wage are married adults, 40% of them have kids of their own.
- Workers can make up the difference in tips: This assumes two things: (1) it’s okay to eke out a living dependent on the kindness of strangers and the tipping protocols of restaurant owners and (2) the majority of minimum wage jobs are in the food industry. In fact, only 20% of the minimum wage jobs are in food services. The remaining 80% are in sales (wholesale and retail), care providers, educational, legal, and public protection support, education and paraprofessional occupations, natural resources, agriculture, and transportation and heavy equipment operation and maintenance. When was the last time you tipped the lawn guy?
- The increase will damage the economy: This complaint is usually accompanied by an n=1 story of a restaurant owner who’s cut staff in anticipation of a yet-to-be-implemented increase. It ignores the fact that only 6.4% of Alberta’s work force earn less than $15/hour and creates the impression that paying these employees an additional $1.40/hour will materially impact Alberta’s economy which is simply not true.
- Boosting the minimum wage means all wages will increase: This is correct to some degree, but guess what, earning a living wage is not a bad thing. In fact, it will prevent what Robert Kuttner describes as a “collective loss of purchasing power [that keeps] the entire system in a downward economy spiral and a slow-growth trap.”
The “cost of doing business” mindset
Conservatives often argue that the cure for all that ails us is the dignity of hard work. It’s time for them to recognize that the dignity of hard work is crushed by the drudgery of working for poverty wages.
A person is not a widget. His labour on behalf of his employer is more than a mere input into the cost of doing business, it’s his “livelihood”. The price of a human being’s livelihood cannot be determined by market forces alone.
A business owner who insists Albertans should be happy working for less than $15/hour has no respect for human dignity.
And a business that is competitive only because it is permitted to grind out products and services on poverty wages will not be economically viable for long.
Can Democracy Survive Global Capitalism? By Robert Kuttner
This message should be shouted loud and clear everywhere. It has been proven that raising the minimum wage does not kill employment and may have a stimulating effect.
You’re right Brent, Alberta’s minimum wage went up from:
$10.20 to $11.20 in Oct 2015
$11.20 to $12.20 in Oct 2016
$12.20 to $13.60 in Oct 2017
and will go up to $15.00 on Oct 1, 2018
This increase coincided with the dramatic drop in oil prices.
Some people lost sight of the fact that the increase in minimum wage did NOT cause the loss of jobs in the energy industry and those businesses directly and indirectly impacted by the downturn in oil prices. In fact when the energy industry was booming some businesses were offering wages of up to $20/hour ($10 above the minimum wage at that time) and didn’t whine that such high wages would force them out of business. Naomi Lakritz wrote a great piece on this: https://calgaryherald.com/opinion/columnists/lakritz-prices-will-go-up-anyway-despite-minimum-wage-increase
Remember, too, Henry Ford’s early approach to worker wages: he paid his auto workers enough that they could afford to buy the cars they were building. By the same token, higher-paid workers can buy more and contribute to economic activity. Working poor don’t buy as much as those of at least modest means.
Excellent point Jerry. Interestingly, research has shown that an increase in wealth for the rich does very little to stimulate economic growth, but an increase in income (including a minimum wage hike and reduced taxes) for the poor and the middle class has the opposite effect, they spend more because they have more and this has a positive effect on economic growth. Makes sense doesn’t it. If you have millions of dollars you don’t need to buy much stuff and you’re more likely to save/invest it, but if you don’t have lots of money you’ll be spending what you have on the basics and some little extras. According to research “…the marginal propensity to consume of high-income earners is substantially less than for low-income earners…poorer people are likely to spend the bulk of any extra income while the wealthy are more likely to save it.” . https://www.theguardian.com/business/2015/jun/04/better-economic-growth-when-wealth-distributed-to-poor-instead-of-rich
“Conservatives often argue that the cure for all that ails us is the dignity of hard work. It’s time for them to recognize that the dignity of hard work is crushed by the drudgery of working for poverty wages.”
Not holding my breath.
It comes down to how we Albertans account for these wage and income disparities, and more deeply, what we want to believe about ourselves in relation to other people and the broader world.
If wage and income disparities reflect disparities in quantity, quality and accessibility of resource and opportunity, it means the playing field isn’t level (it ain’t).
This confounds the desire of many (most?) prosperous people to believe they *deserve* their prosperity, and that everyone else deserves whatever they have whether rich or poor.
Few of us ever question this belief or whether we really *deserve* to benefit from Alberta’s extraordinary wealth of natural resources and public assets, despite making little if any contribution to it.
At some level we might recognize that we are privileged to live here, but it seems like most of us prefer to believe it’s an entitlement and that we’ve somehow been ‘chosen’.
The truth is that we’re all damned lucky, and some of us are really damned spoiled.
But we’re not about to admit it, because we all want to believe we’ve earned what we have.
If we were truly grateful for the extraordinary privilege of being Albertan, how would anyone know?
This is an excellent point James. It’s hard to convince those who believe they “deserve” their wealth and position that their success is based on them being in the right place and the right time, and often being born into the right families and knowing the right people. I’m not saying these people didn’t work hard (although some didn’t). Most of the people I’ve met in the energy industry, from the mail room clerk to the CEO, worked hard but some people are too entitled to understand their success was partially dependent on circumstances beyond their control. These people rode to the peak with an ostentatious display of wealth and then blamed everyone but themselves for their lack of foresight when it was all over.
I believe you misstated that 6.4% of employees in Alberta earn less than $15. According to Alberta Labour, 6.4% earn exactly minimum wage, which is currently $12.20. Many employers offer a starting wage that is slightly above mimimum or give raises after a probationary period. The 6.4% doesn’t capture all of the workers who will benefit from the increase.
Kelly, you’re point is well taken, although it looks like we’re both slightly off on our facts. I misread the graph that appears as Figure 1 in the Alberta Minimum Wage Profile report, it says 6.4% of Albertans earn less than the current minimum wage, however the current minimum wage is $13.60, not $12.20. In any case that doesn’t take away from your point. Thanks for bringing this to my attention. Here’s the link to the report https://work.alberta.ca/documents/alberta-minimum-wage-profile.pdf
Susan: Once again, thanks for another great blog. There are obvious facts with this partucular issue that certain people fail to see. First of all, if a business can’t afford to pay their employees a decent wage, then they have other problems and should not be in business. Secondly, the automation issue is another area that certain people think is linked to a minimum wage increase. Businesses have been automating things for decades. We have seen examples of this with ATMs at banks, robotic welding in vehicle assembly plants, and self checkouts at grocery stores and other places, like hardware stores, and so on. That has nothing to do with a minimum wage increase. Thirdly, there are people who wrongly believe that raising the minimum wage will make prices of goods go up. Alberta has had the lowest minimum wage in Canada for years, until recently. Alberta also was leading Canada with the highest rate of inflation, since the early 2000s. Also, in the middle part of the last decade, rental costs in Alberta went up through the roof (no pun intended), in a very short amount of time. At that time, Alberta’s minimum wage was still the lowest in Canada, (if not near the bottom). Since a very small percentage of Alberta’s population earns minimum wage, how will increasing it be damaging to the economy? People still need a decent wage to survive. Not all minimum wage earners are teenagers, who live at home. The economy is not controlled by minimum wage either, but by larger factors, like commodity price swings, and what other governments are doing, like the U.S government.
Well said Dwayne. You’re correct that people who object to increasing the minimum wage trot out a number of reasons why businesses *need* to pay employees poverty wages. In addition to the ones you’ve listed there’s the excuse of globalization. When you strip down this argument it’s really about the ability of businesses to relocate to a developing country and pay poverty wages to the locals in order to force the existing work force to work for less than a living wage–it’s really a case of workers competing with each other to see who will accept the lowest wage.
Kuttner says the issue isn’t globalism and technology as much as the success businesses and financial institutions have had in weakening the democratic limits on capitalism (things like deregulating the flow of capital, destroying unions, repealing minimum wage laws and protection from arbitrary dismissal). An extreme example of this is the the European Commission’s Posted Workers Directive which allows a company to hire workers in Poland and “post” them to England but employ them under Poland’s lower wage laws and poorer worker safety laws. British workers blame the Polish workers, but they should be blaming the British company that brought them in under such conditions and their governments who agreed to abide by such terms in the first place.
Thanks for this article Phil. It’s always good to get the facts from an economist instead of the fearmongering of a conservative politician or business lobbyist. I really liked Stanford’s comment about the gloom and doom studies where he says, “The most that any of these studies can claim is that employment will grow more slowly under higher minimum wages than in their absence. None predict that employment will decline”. Anyone who discounts Stanford’s argument because he’s a “union economist” should check in with UofC economist Trevor Tombe,
Facts trump misrepresentation and obfuscation every time. Good job pointing out the errors in the flawed logic of the minimum wage skeptics and cynics Ms Soapbox!!
A meta-study of 64 minimum wage studies published between 1972 and 2007 point towards no or near-zero effect on employment numbers. Flawed studies by right-wing think tanks, AstroTurf organizations and financial institutions do not adjust for inflation, for economic growth, population and aggregate demand in their analysis. They cherry-pick their facts and only *predict* outcomes — often failing to revisit their projections after the wage increases have occurred. Coulda, shoulda, woulda is not empirical evidence. Yet this debate rages every time a political jurisdiction raises the minimum wage. And the right-wing media scribes who write about minimum wage hikes distort and misinform when they fail to reveal and take into consideration the full basket of economic indicators that impact minimum wage hikes in their province or state.
If your business model includes profitability based on the backs of minimum wage workers — you should go out of business. Businesses that reject minimum wage hikes are free riders and parasites on the overall economy. When people earn a decent wage they bolster the economy by increasing aggregate demand for goods and services. What’s not to like?
J.E. thanks for this insightful summary of all the issues at play here. The issue that’s the hardest to address is your last point that a business model that “includes profitability based on the backs of minimum wage workers” should go out of business. This leads us into the discussion Jacquie and Carlos have been having which is based on the fact that shareholders don’t care how companies make money as long as they make money and consumers don’t care whether they’re buying consumer goods from a sweatshop as long as the goods are cheap. These shareholders and consumers don’t care whether they’re supporting businesses that harm the economy in the long term, they’re looking for short term gains. Sometimes I think the only way to get through to them is to force them to put in 8 hours on the night shift at WalMart for a year to see if they’ll start to think about this issue with compassion instead of selfishness.
I totally agree with this articlle.
Please explain this to minister Sabir, I think you know what I mean
Thanks Walter. Hopefully the minister reads the blog.
While I understand your viewpoint, I would like to provide a reality check. My sister works for a grocery store. As the minimum wage has been increasing, her hours, as well as those of her coworkers, are decreasing. Thus, the increase per hour is not helping her: she is a part-time employee as there are very few full time positions in this industry. Does the fault lie with the company? Yes, but they serve the board/shareholders who demand a return. We also need to look to the customer, who support a “living” wage but will not or cannot afford to pay the higher prices needed to feed these increases. I wish the solution were more cut and dried. In my experience, it is not.
Jacquie what you told us is probably right but here is my question –
If the choice is lowering the expectations of the board/shareholders or having people in poverty, why is our choice always letting people suffer under awful conditions?
The fact is that in the last 30 years the profits of most corporations has gone up tremendously and so have the salaries of those running them. If these people never seem to have enough and are forcing some members of our society to have to struggle all their lives so that they can afford to live in monarchic luxury we have to intervene. If Canada with a third of the current GDP could pay these people enough to have a living wage and now cannot the problem is not lack of money. The real problem is that they are all in bed with the politicians to run our society so that they can continue exploiting people whatever way they want. If they claim they cannot pay these salaries, I would respond – show me your books.
There are exceptions of course but lack of money is not the rule. People have just assumed this ideological position that only them deserve to have what they earn. The old feudal ideas have been incorporated in our brains through propaganda and lies.
I don’t know if I can answer your question – this is a societal query that has existed throughout time and various ideologies. What I can say is that when I read that a recent motion was made at a major grocery chain’s shareholder meeting to grant all employees a living wage, it was voted down. I can also tell you from recent personal experience that providing records profits to a Board may still not be enough, as Susan herself knows well.
The point I was making was that the hike in minimum wage hasn’t done much of anything to assist my sister and her family. That is simply a fact.
Jacquie that does not surprise me – it just proves that the problem is not lack of money, it is purely a human choice. Unfortunately that is a reality that is shocking and like you said it has been with us for a long time.
Jacquie and Carlos, thank you for the excellent discussion. At the end of the day we have to bring this discussion back to who holds the power in the employer/employee relationship.
As Jacquie points out in the majority of cases it’s the shareholders (who are represented by the Board of Directors and the executives) not the employees who have the power. Invariably when a company experiences tough economic times the shareholders demand the company “do something”. Since it can’t fix the economy (or the stupid decisions it may have made in the past), it cuts benefits, freezes salaries and downsizes staff. These steps do little to improve the bottom line. (I recall seeing a presentation where 20% of the staff could be cut and it still wouldn’t improve the bottom line because the cut didn’t impact fixed or operating costs, let alone the market price for our products.)
People like Robert Reich suggest one way to redress this imbalance of power is to strengthen unions. Kuttner supports this idea but says it should be done so unions and management are partners working together to ensure the corporation remains economic and responsive to fluctuations in the economy. Kuttner says we should look to the Swedish and Danish models which ensure “employment security” (you will always be able to find a good job) rather than “job security” (you will always work at the same job for the same company).
This is worth exploring.
Jacquie Jamieson: Like I already stated, Alberta has had the highest rate of inflation in Canada since the early 2000s. Alberta had the lowest minimum wage in Canada, for most of that time. If your sister’s hours are decreasing, it is the grocery store owners who are greedy. It’s sad when greedy business owners do not think of anyone else, but only think of themselves.
Wow! Great rebuttal to the usual suspects arguments. Thanks once again Susan.
You’re very welcome Susan!
Very cogent and persuasive!