October 16, 2014

IT'S AN IDEOLOGICAL ARGUMENT, NOT AN ECONOMIC ONE:

Canada Shows Minimum Wage Has Minimal Effect (Christopher Flavelle, 10/16/14, Bloomberg View)

Start with the scary stuff: Does raising the minimum wage kill jobs? It's hard to see any evidence of that in the Canadian unemployment rate, which peaked with the recession in 2009 and has crept downward since, though has yet to reach its pre-crash levels.

Even British Columbia, which raised its minimum wage from C$8.75 to C$10.25 from 2011 to 2012 -- the biggest increase of any province -- saw its unemployment rate fall by almost a full point over the same period, to 6.7 percent.

What about the upside -- did the increase in the minimum wage reduce the share of Canadians living in poverty? Sure enough, the percentage of people living in what Statistics Canada calls "low-income families" fell from 2008 to 2012, the latest year for which numbers are available.

But take a close look at the y-axis: Over four years, the share of people with low incomes fell just 0.4 percentage point, even as the minimum wage increased 16 percent in real terms during the same period. Moreover, some of that modest decrease was almost certainly due to the pickup in growth after the recession.

Of course, unemployment and poverty levels are blunt instruments for detecting the effects of raising the minimum wage, and they don't tell you how much of that was due to other factors. So I put the question to two economists who study this field.

"The link with poverty and the minimum wage is almost zero," said Stephen Gordon, an economics professor at the University of Laval in Quebec City. "Lots of people who earn the minimum wage are not in poverty, and a lot in poverty don't earn the minimum wage -- the problem is they're not working, or the number of hours they get."



Posted by at October 16, 2014 5:31 PM
  

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