Wednesday, January 07, 2009

52,000 Jobs Could be Lost in BC

Report Says $10 Minimum Wage

Could Cost 52,00o BC Jobs

Raising BC’s minimum wage to $10 per hour could result in a loss of as many as 52,000 jobs, concludes a new peer-reviewed study from independent research organization the Fraser Institute.

The study, The Economic Effects of Increasing BC’s Minimum Wage, examines the research on the effects of increases to minimum wages in Canada and around the world and calculates that an increase in BC’s minimum wage to $10 per hour from $8 per hour will result in job losses ranging from 10,898 jobs to 52,200 jobs.

“This is a conservative estimate that only looks at the impact on teen and youth workers,” said Niels Veldhuis, Fraser Institute director of fiscal studies and co-author of the report.

“Increasing BC’s minimum wage to $10 per hour will have a profoundly negative effect on employment opportunities for young and low-skill workers, and will have almost no effect on those most in need of income and a job.”

Unions and other activists have been lobbying the BC government over the past year to increase the province’s minimum wage to $10 per hour. But while the campaign has been high on emotional appeal, it lacks facts and data to support its position.

The Fraser Institute study examines existing academic research from Canada and around the world that studied the effects of increases to minimum wages and finds the overwhelming consensus is that increasing the minimum wage has a significant negative impact on employment, particularly for younger workers.

Past experience across Canada showed that a 10 per cent increase in the minimum wage is likely to decrease employment by three to six per cent among all young workers aged 15 to 24. For those young workers most directly affected – earning between the current $8 per hour wage and the new $10 per hour wage – the impact is more acute, leading to employment losses of 4.5 to 20 per cent.

The report also points out that higher minimum wages have other negative effects, including fewer benefits and less training for workers. Higher minimum wages can also induce high school students to drop out of school and search for employment.

“Fewer employment opportunities and less education and training are particularly harmful, given that experience and skill development are important drivers of higher wages,” said Keith Godin, co-author and a Fraser Institute senior policy analyst.

Who earns minimum wage?

Veldhuis and Godin note that the most commonly cited purpose of minimum wages is to increase the incomes of society’s low-income workers. But at the same time, there is a general misunderstanding of who actually earns the minimum wage.

Based on data from Statistics Canada, the authors found that 62,600 BC workers earned the minimum wage in 2007, representing 3.4 per cent of total employment in the province. The majority of these people were young workers between the ages of 15 and 24 (56 per cent), with 87 per cent of them living at home with family. More than half of these young workers were also attending school, while many of the remaining individuals earning minimum wages are adults supplementing their family income with part-time work during child-rearing years or after retirement.

“The typical minimum wage worker in BC —and across Canada— is a young person, often a student, who is living at home. This means any changes to the minimum wage will mainly affect younger workers and have negligible impacts on working adults or those supporting families,” Godin said.

Veldhuis and Godin also point out that earning the minimum wage is largely a temporary experience, as the vast majority of workers who earn the minimum wage today will earn more than the minimum wage in the near future.

They conclude that any increase to BC’s minimum wage results in a loss of jobs and opportunities for young workers and will have no appreciable effect on low income workers or those living in poverty.

“While implemented with the best of intentions, the economic reality is that minimum wages likely do much more harm than good. Minimum wages are simply incapable of achieving the intended results and can actually worsen the situation of the people minimum wage laws are intended to help,” Veldhuis said.

“If the government wishes to raise the incomes of and improve economic opportunities for British Columbia’s low income earners, they would be wise to steer clear of increasing the minimum wage.”

Editors Comment: If these jobs would disappear at $10 per hour, why are they existing at $8 per hour? They are either legitimate jobs or they are not. The report says in 2007 62,000 workers were earning minimum wage. The report further suggests the increase to $10 could lose up to 52,000 jobs. The report seems to suggest that most of these jobs would simply vanish if the minimum wage were increased.

So, who is going to flip your burger, pour your coffee or clean your hotel room? I realize that some of these jobs are not done for minimum wage, they are probably being done for $8.50 an hour instead. These people would also benefit from the $10 per hour minimum which should be the proper point of comparison. Not how many people are earning minimum wage, but rather how many people are earning less than $10 an hour.


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