Writing in the Globe and Mail, Macdonald-Laurier Institute Managing Director Brian Lee Crowley says that Alberta’s newly elected NDP government’s plan to raise the minimum wage will only price the weakest workers out of a job.
By Brian Lee Crowley, May 29, 2015
When my wife and I owned our little restaurant in Dartmouth, Nova Scotia, the biggest issue we had, bar none, was staff. My wife, who actually ran the restaurant, had to be constantly alert to make sure that hard-working employees got appropriately praised and rewarded, while those who didn’t deliver the goods were politely but firmly pressed to meet our standard.
It is this notion that workers are not all created equal that seems to be the missing element in the discussion around the Alberta NDP’s plan to press on with raising the minimum wage to $15 an hour. Most of the commentary seems to focus on whether this will harm “the economy” or whether such a steep rise will magically have a “stimulative” effect. But the real issue isn’t one about how the economy as a whole will be affected. Rather it is how the weakest and most vulnerable workers will be. And for them the news is not at all good.
This will come as a surprise to those who think raising the minimum wage is an unalloyed good for those working at the bottom of the wage scale. But that’s what comes from forgetting that the minimum wage is simply a government-dictated price, in this case a price for an hour of labour.
As consumers we never look at the price of something in isolation. We always want to know what we’ll get for our money. Employers are no different. If the government is going to tell them that they cannot pay any worker less than $15 an hour, they will simply demand twice the productivity from those employees than they did when the minimum was, say, $8 an hour. In other words, a $15 an hour minimum wage is a decree that anyone who produces less than $15 in value with an hour of their work will not be employed. Nothing more, nothing less.
This idea that workers must earn their wage as a reward for measurable effort is, of course, anathema to those who think that low wages are a moral affront to the dignity and equality of workers. But employers don’t pay for moral equality. They pay for work, and not all people are capable of producing $15 with an hour of their time.
Those least likely to be able to do so are the ones who find it hardest to land a job anyway. At our restaurant we had one employee who hid out in the back room when lunch started because she found it too stressful dealing with the rush. Then there were the young people in their first job who thought employers were like parents and you could just off-handedly announce you needed to take weekends off and that you would of course be forgiven for just not bothering to show up for your shift if something else “important” came up. One of our cooks insisted on getting into bar fights and then wanted us to keep his job open while he served jail time. My favourite was the server who literally took 20 minutes to describe in minute detail every item on the menu at every table and absolutely refused to speed things up while hungry customers fumed. As a small business in a highly-competitive industry, we simply could not afford such behaviours. If we’d had to pay $15 an hour we’d have had fewer employees who would have worked harder and we’d have been a lot less forgiving of productivity-destroying peccadilloes.
Every time you jack up the minimum wage, you make it harder for employers to employ the illiterate, the undisciplined, the inattentive and the untrained. Putting a floor under the wages you can pay them doesn’t mean higher wages for them, but a much higher hurdle for them to leap to get into jobs that will give them the training and experience that make them valuable and therefore able to justify a higher wage.
Higher minimum wages mean higher incomes for those lucky enough to be productive at that level, and chronic unemployment for those who are not.
Social programs clean up the damage for those with few skills to offer, but too often do so by trapping them in dependence on those programs and preventing them from acquiring the skills to improve their lot. That’s one of the reasons why Munir Sheikh, former Chief Statistician at StatsCan, argued in a paper for my Institute recently that our social welfare schemes need reform to reduce the welfare trap by equipping the most vulnerable with the skills they need to succeed as workers, not by raising benefits. And, I would add, not by driving up the minimum wage either.
Brian Lee Crowley (twitter.com/brianleecrowley) is the Managing Director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: www.macdonaldlaurier.ca.