Minimum wage hike a flawed anti-poverty policy: Fraser Institute

Many minimum wage earners live with their parents and not in impoverished circumstances, says report

Mario ToneguzziThe debate over minimum wage is a heated one and a new report by Canadian public policy think-tank the Fraser Institute is sure to fuel more fire in this controversial issue.

The study, Increasing the Minimum Wage in Alberta: A Flawed Anti-Poverty Policy, was released on Thursday. It said raising the province’s minimum wage will do little to reduce poverty because 92 per cent of minimum-wage earners in the province don’t live in low-income households as defined by Statistics Canada’s Low Income Cut-off.

“Increasing the minimum wage is a poorly targeted anti-poverty measure, given that most minimum wage earners don’t live in low-income households. There are more effective strategies for helping the working poor,” said Steve Lafleur, Fraser Institute senior policy analyst.

The Alberta government is raising the minimum wage from $13.60 to $15 as of Oct. 1.

“The decision to raise the minimum wage was surely motivated by good intentions, but the policy may ultimately hurt the very people it’s supposed to help,” Ben Eisen, Fraser Institute senior fellow and director of the Alberta Prosperity Initiative.

Steve Lafleur

The Fraser Institute report found that 50.1 per cent of Alberta minimum-wage earners in 2017 were aged 15 to 24, and among this group, 85.1 per cent lived with their parents or other relatives. Only 2.1 per cent of all minimum-wage earners were single parents with young children.

“Moreover, decades of Canadian academic research shows minimum-wage hikes can hurt young and inexperienced workers as employers adjust to higher labour costs, leading to less employment. Raising the minimum wage can also lead to reduced hours and fewer benefits for workers.

“Finally, minimum-wage hikes can lead to higher prices for goods and services, disproportionately affecting the poor, as employers pass the increased cost of labour onto consumers in the form of higher prices,” said the organization.

According to the provincial government, about 254,000 Albertans – 11 per cent of all workers – earn less than $15 per hour. More than half of them work full-time and nearly 40 per cent are parents.

“Low-income earners should be able to support their families without having to visit the food bank. That’s why we’re changing Alberta’s minimum wage to $15 on Oct. 1, 2018,” says the government on its website. It adds that a higher minimum wage can help reduce poverty, lessen the burden on social support programs and improve the quality of life for vulnerable people.

“It can also improve employee satisfaction, which can help employers reduce staff turnover, recruitment and training expenses. Higher levels of employee satisfaction and productivity may improve profits and help expand business,” it says.

“Recent studies in Canada and the U.S. show that gradual increases to the minimum wage do not have a negative effect on overall employment levels,” the government says.

“Positive effects of raising minimum wage include increased consumer spending, better health outcomes and lower wage inequality, especially for women.”

Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald, including 12 years as a senior business writer.

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