Minimum Wage: Musings

According to Statistics Canada data, there were 17,100 people at the minimum wage in 2009.  As a percentage of total workers, it is lower than the national average but it is up considerably since 2004 (around the time government started aggressively increasing the minimum wage).   Based on national data, about 60% of those in minimum wage are between 15-24 which, in the case of NB, would leave about 7,000 people over the age of 24 collecting the minimum wage.

By a wide margin, the largest proportion of people working at the minimum wage are in the accommodation and food sector where tips distort the picture somewhat.

I don’t really have a position on this one way or the other.  From an economic development perspective, the government has to pursue higher wage jobs anyway.  The shrinking workforce is going to put natural upward pressure on wages anyway as evidenced earlier this week when new data showed the number of NB families below the poverty line continues to decrease.

I have written on this before but it is worth noting that the much reviled customer contact industry did more to raise wages at the low end than anything I have seen before or since.  In Moncton, for example, in the 1970s and 1980s there was a large cadre of workers at or close to the minimum wage in sectors such as accounting, bookkeeping, reception, secretarial, retail, etc.   But the call centres came in at $12/hour or higher and gobbled up most of those workers.  Local firms were grumbling in the late 1990s of having to pay $14/hour or more for a receptionist.  If you look at the occupational data from the Census there was a steep drop in the number of secretaries and receptionists – partly reflecting a national trend but in a major way reflecting this significant upward pressure on wages.

Substantial economic growth or a prolonged tightening of the labour market will both drive up wages.   Several fairly large manufacturing firms in the Moncton area have closed in recent years because of the challenges finding workers under $15/hour.    Others around the province are bringing in immigrant workers because they can’t find workers at $12/hour.

I spent three weeks in Brazil and one of that country’s structural economic challenges is that many of the jobs we call ‘middle class’ jobs (construction as one example) are paid very low and the real ‘middle class’ in Brazil has an interest to keep it that way.  If domestic workers, construction workers, retail workers, etc. starting earning a first world wage level, very few people could afford a live in nanny and Home Depots would boom because it would be far more expensive to hire construction workers to do odd jobs around the house.

My point is that one of the reasons Canada is a first world country is that we have first world wage levels.  In practice this means most of us will never afford a live in cook or nanny but it is a reasonable trade.

Having a reasonable minimum wage is part of this.

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2 Responses to Minimum Wage: Musings

  1. Agreed.

    Another point worth noting. In the past you have talked about jobs where something is actually produced (especially for export) and other jobs that are more spin-offs from this primary work.

    Pretty much all minimum wage work falls into the latter category. Which means we aren’t harming the economy if (as their employers claim) there are job losses in this sector. Especially given that it is a much more productive use of their time to upskill and prepare for jobs – even call centre jobs – that draw revenue into the economy.

    When I went to a restaurant in Mexico I was amazed that there were so many staff doing various jobs. It took an entire team of workers in order to serve us dinner. This was possible only because they were paid so poorly. But the economy of Mexico is improved if there are fewer people working in that restaurant and more people working in production and information economy work.

    No doubt the restaurant owners in Mexico would like to keep their legions of staff instead of investing in dishwashing machines and cash registers. But keeping the lower end of society poor weakens, rather than strengthens, a society.

  2. richard says:

    As a business owner, I find the minimum wage positions taken by the CFIB an dlocal C of Cs to be a bit bizarre. In January of this year, EI premiums were increased by 5 cents per $100 of wages. To the employer, that is an increase of 7 cents per $100. The Board managing the EI funds wanted 15 cents, but (with an election in the offing) the Cons kept that down to 5. No doubt the missing 10 cents will be added in Jan 2012. For many employers with a dozen or so or more employees (assuming that more than a few of them get paid considerably more than minimum wage), the EI employer premiums outweigh by a large margin the impact of minimum wage increases. If the proposed minimum wage increases were really a significant employment threat, would not the EI increases have had a greater impact?

    The decision by Alward et al to spike the wage hike is just another example of focussing on the wrong issue.

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