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Afraid to Raise Minimum Wage?

We shouldn't be. Research proves it.

By David Schreck 18 Apr 2007 | TheTyee.ca

David Schreck, a former NDP advisor to the premier and a management and economic consultant, publishes his political newsletter StrategicThoughts.com here.

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Job loss fears unfounded.

Some things are as reliable as Pavlov's dog. The NDP issued a news release calling for the minimum wage to be increased to $10 an hour and the salivating dogs, in this case the BC Chamber of Commerce and Retail BC, promptly countered with criticism of the idea.

Retail BC argued that most businesses already pay more than the minimum wage. By contrast, the Chamber's release argued that an increase would impose an increase in "labour costs of over $450 million" on small businesses. According to their release, John Winter, president and CEO of the BC Chamber of Commerce, said:

"Employers recognize that the minimum wage is only a basis for an individual to enter the workforce, the fact is that less than two per cent of individuals who have been in a job for more than five years are still paid minimum wage. While many think of workers on minimum wage as the 'working poor' this image is far from reality. Close to three-quarters of those earning minimum wage are either part of a couple with a partner earning more than the minimum wage, or are young people and students still living at home."

It's been a long time since someone in a leadership position openly justified lower wages on the basis that the income is secondary to that of the main breadwinner, although it is common to hear the argument that it's acceptable to underpay students (while raising their tuition).

Thousands would benefit

Statistics Canada doesn't appear to publish any data that would support Winter's claim about minimum wages and the length of time in a job, but its Labour Force Historical Review contains frequency distributions of wages by age, sex, occupation and industry for the period 1997 through 2006. In 2006, 24,500 people in B.C. made less than $8 an hour and another 221,200 made between $8 and $9.99. Women over age 25 made up 7,500 of the workers making less than $8.00 an hour, and 66,500 of the workers making between $8 and $9.99. A full-time worker, working about 2,000 hours a year at $8 an hour, makes $16,000 before taxes.

Statistics published by Revenue Canada indicate that in 2004 (the most recent year available) there were 113,490 women between the ages of 25 and 54 with incomes between $10,000 and $20,000, averaging $15,129.

That includes thousands of victims of the low minimum wage, many of whom are single parents. The National Council of Welfare has found that one-quarter of poor families has a major income earner who worked full-time for a full year.

Hasn't hurt economy

The Association of Community Organizations for Reform Now, ACORN, supports campaigns to raise the minimum wage throughout the U.S. It recently had successful campaigns to raise the minimum wages in Arizona, Colorado, Missouri, and Ohio.

In the United States, cities can also set minimum wages that apply to all businesses in their jurisdiction, not just those servicing the municipality. The minimum wage in San Francisco is increased annually as it is indexed to the cost of living; since January 1, 2007, it is $9.14 per hour.

In Canada we don't have the referendum tools that have been used in the U.S. to force politicians to raise minimum wages and Canadian cities don't have the legal authority to set minimum wages; campaigns here have to concentrate on pressuring provincial governments to raise and index the minimum wage.

Economists David Card and Alan B. Krueger's 1994 study, published in the American Economic Review, compared 410 fast-food restaurants in New Jersey and eastern Pennsylvania before and after the 1992 increase in New Jersey's minimum wage. They found no indication that the increase in the minimum wage reduced employment. That research is expanded on in Myth and Measurement: The New Economics of the Minimum Wage, published in 1997 by Princeton University Press. In 1998 the National Bureau of Economic Research published their further work on the 1992 New Jersey increase in the minimum wage, which found "similar or slightly faster employment growth in New Jersey relative to eastern Pennsylvania after the rise in New Jersey's minimum wage."

Of course, right wing opponents of living wages don't want to let the evidence get in the way of dogma about minimum wages.

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