Why Canada should not raise minimum wage?
Minimum wage increases raise the costs for firms that operate on a low-wage, high-turnover model. Evidence for Canada shows that when minimum wages are higher, it takes workers longer to find jobs, but, once found, those jobs last longer and pay more (Brochu and Green, 2013).
Raising the minimum wage would increase the cost of employing low-wage workers. As a result, some employers would employ fewer workers than they would have under a lower minimum wage.
Opponents of raising the minimum wage believe that higher wages could have several negative repercussions: leading to inflation, making companies less competitive, and resulting in job losses.
The minimum wage concept has failed because it hasn't kept pace with the rising cost of living, causing many working people to live below the poverty level. Average health insurance premiums in 2021 were $7,739 for single coverage and $22,221 for family coverage.
Alternatively, other financial experts point to the cons of raising the minimum wage, including potentially increasing the cost of living, reducing opportunities for inexperienced workers, and triggering more unemployment.
Minimum wage in Canada mostly follows the rates set by provinces. There is a federal minimum wage ($15.55, effective April 1, 2022), but it only applies to those working in federally regulated industries, such as banks, postal services, interprovincial transportation and federal Crown corporations.
A minimum wage can cause cost-push inflation. This is because firms face an increase in costs which are likely to be passed on to consumers. This is even more likely if wage differentials are maintained.
In addition to negative employment effects, the risk of rising prices is one of the most oft-invoked arguments against raising the minimum wage. And it has a lot of merit: minimum wage hikes tend to cause businesses to raise their prices, particularly companies that employ a substantial amount of low-skilled labor.
The effects of minimum wages on youth employment and income
Minimum wages reduce employment opportunities for youths and create unemployment. Workers miss out on on-the-job training opportunities that would have been paid for by reduced wages upfront but would have resulted in higher wages later.
Raising the federal minimum wage would exacerbate income disparities and the cycle of poverty. Cost of living varies wildly in the United States. For example, living in New York, California, and Hawaii costs significantly more than living in Mississippi, Kansas…
Is Canada underpaid?
Despite overall salary growth in Canada, more than half of professionals (57 per cent) feel underpaid. Thirty-four per cent plan to ask for a raise if they don't get one — or the amount is lower than expected — by year-end.
Minimum wage policy was originally established to protect vulnerable workers from exploitation, and it continues to be used by governments to safeguard non-unionized workers (see Labour Force; Unions). Minimum wage is the lowest wage rate that an employer is legally permitted to pay to an employee.
Some studies find that the minimum wage has significant benefits for workers; others conclude that it is harmful. Many studies have been inconclusive. Even so, there appears to be a growing consensus that when the minimum wage is set at a moderate level, the impact on employment is modestly negative.
- It is long overdue. ...
- It would address longstanding racial and gender inequities. ...
- It would reduce poverty. ...
- It would fuel economic growth. ...
- It would save taxpayer money and reduce use of government programs. ...
- It's what the vast majority of Americans want.
Multiple studies conclude that total annual incomes of families at the bottom of the income distribution rise significantly after a minimum wage increase. 56 Workers in low-wage jobs and their families benefit the most from these income increases, reducing poverty and income inequality.
Arguments for Raising Minimum Wage: It Will Benefit Millions, Lift Struggling Workers Out of Poverty. The CBO report does have some silver linings: It estimates a federal minimum wage hike to $15 per hour would lift nearly one million people out of poverty and nearly 27 million workers would be affected by the increase ...
Opponents of increasing the minimum wage to $15 argue that it will burden small businesses—which make up 99 percent of all employers—with increased labor costs and result in layoffs, expediting automation or going out of business.
Some studies find that the minimum wage has significant benefits for workers; others conclude that it is harmful. Many studies have been inconclusive. Even so, there appears to be a growing consensus that when the minimum wage is set at a moderate level, the impact on employment is modestly negative.
a. Increasing the minimum wage will lead to employees earning more money which will lead to employees hiring more workers which will cause a shift to the right in the supply curve. b. Increasing the minimum wage will cause the government to hire more workers which will help to reduce the national debt.
The "Fight for $15" movement started in 2012, in response to workers' inability to cover their costs on such a low salary, as well as the stressful work conditions of many of the service jobs which pay the minimum wage.
How does minimum wage affect the economy?
According to the basic economics 101 explanation, an increase in the minimum wage motivates more people to enter the labor market because they will earn more money. At the same time, an increase in the minimum wage increases firms' costs and the quantity of labor demanded decreases (firms hire fewer workers).
Raising the minimum wage would increase economic activity and spur job growth. The Economic Policy Institute stated that a minimum wage increase from the current rate of $7.25 an hour to $10.10 would inject $22.1 billion net into the economy and create about 85,000 new jobs over a three-year phase-in period.
Effect of higher minimum wages on economic growth
If workers receive a pay increase, then there will be a rise in consumer spending. Low-income workers are likely to have a higher marginal propensity to consume (in other words they spend high % of extra pay).
Even in a struggling economy, studies have shown that increasing the minimum wages doesn't damage job growth—in fact, a landmark study found the opposite; employment increased as did consumer spending in the years following the increase. People in unions are standing united for better pay and benefits.