Among the tasks assigned to the province’s new labour minister, Harry Bains, is the creation of a Fair Wages Commission. The commission is to “support the work of implementing [a] $15-per-hour minimum wage by 2021.”
The membership hasn’t been announced yet, but I doubt it matters. After all, the marching orders are explicit — produce recommendations for a $15 minimum wage, and do it in 90 days.
Which is too bad, because good intentions notwithstanding, there is more convincing evidence against this scheme than for it.
Several studies have looked at the results of raising minimum-wage rates. Some found only moderate impacts, but characteristically, they dealt either with relatively small wage hikes, or they focused on narrow sectors of the job market.
A new study by labour experts at the University of Washington is far more comprehensive, and far more troubling.
In 2014, Seattle city council voted to raise the city’s minimum wage, in stages, to $15 per hour. Wisely, council asked a team from the university to track how the experiment fared.
The first in a series of hikes, from $9.47 to $11 per hour, took place in 2015 and went smoothly.
But the second lift, in 2016, was anything but smooth. When the minimum wage was raised to $13, the average earnings of low-income employees declined, by $1,500 per year.
The reason is that local businesses reacted to the higher cost of labour by cutting their employees’ shifts or laying off staff.
Why should we believe these findings? Unlike other studies, this one looked at every category of low-income job, and tracked 89 per cent of employers over a period of two years. It also used robust data published by U.S. federal agencies.
Some chain stores were excluded, because they did not report where their employees work. However, since these companies tend to operate on thin margins, they’re more likely to cut shifts when wages rise.
In one respect, none of this is surprising. While most labour markets can absorb small wage increases, Seattle imposed a 37 per cent hike in just two years.
Coincidentally, lifting the current rate in B.C. to $15 represents a 38 per cent increase. Although the plan is to accomplish this over four years, that’s far more than inflation.
Last November, the McDonald’s fast-food chain in the U.S. announced it was replacing some employees with self-service kiosks. A former CEO of the company noted: “It’s cheaper to buy a $35,000 robot than it is to hire an employee … making $15 an hour.”
Perhaps the most troubling aspect of this experiment is that the workers most likely to suffer are those already most vulnerable.
They’re not just poorly paid.
They tend to work in jobs with few benefits, they have little or no control over shifts, and their employers — often restaurants and mom-and-pop stores — tend to have high failure rates. It doesn’t take much to upset such frail apple carts.
So here is a suggestion for the new government: Forget the $15 minimum wage. It’s a path to unemployment, especially for young people trying to get a foothold in the job market.
Concentrate instead on the real cause of economic hardship in our region — unaffordable housing. Force municipal governments to undertake a major simplification of property-development regulations.
Put more money into low-income accommodation. Crack down on Airbnb and other online platforms that are busy transforming rental suites into tourist havens.
And most important, understand the limits of your power. You can indeed force employers to give their staff a pay raise. What you cannot do is force them to hire workers who will cost more than they bring in.
