Higher minimum wage won’t end poverty

In one fell swoop, the Alberta government has managed to ensure the perpetuity of both future minimum wage increases and the controversy over the minimum wage itself.

After freezing the wage last year, Employment Minister Thomas Lukaszuk was under mounting pressure to increase it this year.

Last year, the government argued that given the impact of the recession, an increase in the minimum wage would threaten jobs and the viability of small businesses. However, the minister suggested he'd consider an increase once the economy had recovered.

Well, advocates of a wage increase got their wish, but they are not exactly celebrating. The minimum wage is indeed going up, but in the process, two tiers of minimum wage are being created.

Alberta's minimum wage will go from $8.80 an hour to $9.40, effective Sept. 1. However, it will rise to just $9.05 for those who work as servers in licensed establishments. Eventually, there will be a permanent one-dollar discrepancy between the two tiers.

It makes the landscape more muddled, but also helps to reveal some plain truths about the minimum wage.

The province quite rightly points out that servers, for whom a large portion of their income is derived from tips, are not exactly minimum wage earners. Such workers represent a significant proportion of those earning minimum wage in Alberta. How exactly does raising their wage in any way address poverty?

Employers who do pay minimum wage might have some tough decisions to make. If they intend to absorb the cost, that could mean fewer positions, fewer hours of work and scaled-back benefits or training. Higher prices would be the other choice — bad news for low-income earners.

Here in Alberta, however, most low-skill jobs already pay above the minimum. That's what really matters — not what the minimum wage is, but how relevant it is.

It's true, for example, that Alberta will soon have Canada's lowest minimum wage. What's far more telling, though, is that only 1.4 per cent of workers in Alberta actually earn minimum wage.

When you factor in those earning tips, as well as students living at home, workers who take a second job for extra income, and those for whom their spouses are the primary household income earners, there are not many people left who represent the sort of minimum wage earner portrayed by labour groups.

A 2009 paper in the journal Canadian Public Policy pointed out that more than 80 per cent of low-wage earners are not members of poor households and that more than 75 per cent of poor households do not have a member who is a low-wage earner. The paper concluded, then, that planned increases in Ontario's minimum wage would "lead to virtually no reduction in . . . poverty."

However, groups such as the Alberta Federation of Labour want the government to go much further. The group is pushing for a so-called living wage of $12.20 per hour.

While such an hourly wage might look more attractive when viewed in isolation, the effects of such a policy would far outweigh any benefit.

In 2002, the Quebec government conducted an extensive review of the minimum wage. The report drew heavily on the work of economist Pierre Fortin, who concludes that a minimum wage falling between 45 and 50 per cent of the average income represents an increasing danger to employment.

Alberta's average hourly wage is $25.02, so the living wage puts us right in the danger category. In other words, the sort of policy that harms those it is intended to help.

For those who believe government's role is to directly assist those in poverty, there are a plethora of other ways by which to assist such individuals.

For others — a 17-year-old living at home, for example — there is great benefit in simply having a job. Not just in terms of having an income, but in the valuable work experience earned. Higher minimum wages mean fewer such jobs, and therefore, fewer such opportunities.

Given the far worse options being proposed by others, the Alberta government's muddled approach may be the least detrimental.

The Rob Breakenridge Show airs weeknights from 9-11 p.m. on AM770 CHQR. rob.breakenridge@corusent.com

Calgary Herald, Mon Jun 6 2011
Byline: Rob Breakenridge


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