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Unintended consequences of minimum wage hikes could undermine our success

I heard an interesting statistic the other day on Fareed Zakaria’s excellent international affairs show on CNN. Between 2013 and 2016, income for the lowest 20 per cent of Canada’s wage earners increased 20 per cent. In the U.S., incomes for their lowest 20 per cent fell 16 per cent over the same period. 

I I can’t lie, I felt a little surge of pride at having such a flattering statistic for our society read out on a national broadcast in the country that considers itself the greatest in the world.  

This improvement to the fortunes of our poor was achieved without any significant increases to welfare benefits. Yes, some social services that benefit lower-income families (affordable day care, for instance) have been introduced or expanded in various parts of the country, but the statistic addresses income, not wealth, and therefore isn’t affected by those programs. Essentially, Canadians in the lower income strata are finding more work, getting paid better or the lower-earning ones are somehow vanishing off the record and skewing the statistics. Our labour participation rate is not that different from the U.S.’s, so it’s not the latter. Somehow, we are doing  better at providing lower income jobs, helping people to get those jobs and/or maintaining and raising wages in those jobs.

There could be a lot of reasons for that and, since I’m not an economist, I won’t hazard a guess at what they are. It’s worth noting that the period covered by the statistic is after the Great Recession, so if anything the American numbers should have been improving. The point I’m making here is that these increases also occurred before the minimum wage hikes that have been proposed or implemented in various provinces.

Those hikes have been sold by their proponents as measures to help the poor. There’s no question that the statistic I’m admiring above will be improved even more in the short term once they take effect. My concern is whether they will undermine the factors that were causing us to do so well in the first place.

Companies in the glass industry don’t hire many workers at minimum wage, but increases at the bottom end have a way of putting upward pressure on wages all the way up the chain. Our businesses have been growing – most contractors and fabricators I speak to are busier than they want to be. That means more jobs. Unless, of course, a sharp hike in the minimum wage causes you to look for other ways to support your growth. Maybe investing in some new software could allow you to streamline operations and do more with the same or fewer workers. Maybe you could focus your efforts online and let sales staff go. Maybe you simply defer growth and keep the business the same size.

However you decide to react, I don’t think I’ll be able to take the same pleasure from statistics like Zakaria’s the next time they come up. And if you are looking for productivity-enhancing solutions, may I suggest a visit to Top Glass on April 17. You can find all the details inside.