The Runner Debates: Minimum Wage

Minimum wage should stay where it is

Merit, not entitlement

by Kyle Prince

The minimum wage is being reconsidered in BC as people push to raise it once again to $15 an hour. Only problem is, minimum wage isn’t meant to be living wage. It’s meant to put a bit of spending money into high schoolers’ pockets. It’s meant to help university students make some money on the side while they get an education. It isn’t meant to support a family with growing kids.

Raising the minimum wage hurts more people than it helps. In 1938, the first raise in minimum wage (a measly 25 cents) caused massive job losses. A 2006 study of over 100 minimum wage studies found that over two thirds of those affected were getting the short end of the stick. Sure, those left working are doing well, but that leaves the majority of the people either losing their jobs or taking less hours overall.

The Cato Institute claims that a 2010 analysis by Michael J. Hicks found “the latest round of minimum wage increases account for roughly 550,000 fewer part-time jobs, including ‘roughly 310,000 fewer teenagers working part-time.” This might very well be the goal, though. Move the market away from students, and into the hands of those who need to support themselves. However, this does make it increasingly difficult to beat the vicious cycle of needing work experience to get a job. It doesn’t solve the problem—it just pushes it back a decade or two.

This is looking at America, but we’re close enough neighbours to seriously consider the impact their minimum wage increases had. In 2012, Mark Wilson of the Cato Institute said in his review that, “In the previous federal minimum wage increase from $5.15 to $7.25, only 15 per cent of the workers who were expected to gain from it lived in poor households.” This leaves a huge gap between who people say they want to help, and who actually benefits. Clearly raising the minimum wage doesn’t do the job they’re hoping. In fact, the Wilson review stated, “Since 1995, eight studies have examined the income and poverty effects of minimum wage increases, and all but one have found that past minimum wage hikes had no effect on poverty.”

So, not only does raising the minimum wage not benefit those who want more for their minimum-skill jobs, but the past raises have also led to higher food and restaurant prices. It all just works together to make it harder for people to support families. Instead of complaining that putting in very little effort nets very few results, take the time to invest in the worker. I say this to individuals and society as a whole, invest in yourself. Gain skills, get some education, or even work harder at the current job and aim for a promotion. Nobody is saying it’s going to be easy, but it isn’t supposed to be easy. We reward people based on merit, not how much they think they’re entitled to.

Better Wages, Better Lives

Society needs a minimum wage that meets the cost of living

by Geoffrey Nilson

British Columbia holds the unfortunate honour of being the province with the lowest minimum wage and the highest cost of living. Exponential property inflation and neoliberal economics in the provincial government have proved the perfect storm for this crisis of affordability. But with renewed calls for a dramatic increase in the minimum wage, to bring it more in line with a wage that attempts to meet the cost of living, it is important to outline just who bears responsibility for correcting the problem.

The ultimate goals of capitalism are profit and growth, and an organization under capitalism will act in self-interest. it will act in a manner that benefits profit and growth.

This simple fact underlines the relationship of labour to an organization as that of a cost, or in other more direct language, a hindrance to profit. Generally speaking, wages as part of a total compensation package are one of the largest cost expenditures for most businesses. Logic dictates that if a business can figure out a way to reduce its wage costs while keeping income steady, the organization stands to make a lot more profit for its shareholders. The overall reduction of wages is incentivized as essential to the long-term success of an organization.

What gets lost in this economic analysis is the human factor of the equation. In the analysis of business metrics, it’s easy to forget that wage costs do not exist in a vacuum. When an organization ships factory production jobs overseas or cuts wages to domestic workers, this effort to reduce costs and increase profitability has very real consequences for the people that depend on wage labour for their everyday existence. True, these workers can choose to find alternatives to supplement any loss of income, but when people are compelled by economic necessity, exploitation occurs, and wage labour is no longer voluntary but rather is coerced from the systemic inequality between labour and capital.

Society cannot trust capital to act in the interest of the citizen because that is not the purpose of the capitalist organization. That is the purpose of government. It is up to government to legislate and regulate the environments for capitalism to exist and to guarantee a marketplace free from exploitation. Minimum wage as concept came into western culture in Australia and the United Kingdom and was a direct reaction against wage exploitation. Governments have acted in the past and continue to have a duty to act because legislation and regulation are the fundamental checks on the inherently cannibalistic conditions of capitalism.

Left to its devices, an organization will act in self-interest, but for an organization to make the choice that best serves its interest, that organization must be informed. And it does not seem like those voices opposed to raising the minimum wage have the information to make the best possible choices.

A 2006 study published in the Harvard Business Review suggests that the traditional thinking about raising wages—that the increase would raise their production costs and force price increases—is not correct. In comparing warehouse retailers Costco and Sam’s Club in the United States, the study concluded the higher average wage at Costco provided the company with an industry leading $43-billion in sales, lower staff turnover (and by proxy reduced training costs), lower employee theft, and increased productivity. Not only are the company’s prospects improved, but the general welfare of the economy is improved because employees have increased purchasing power.

Society cannot trust that organizations will be proactive. Government must act to raise the minimum wage, and they will be doing so informed by research that suggests that, contrary to anti-minimum wage rhetoric, when workers are paid a living wage, everyone is better off.