Raising the minimum wage just feeds the economy

Basic economics tells us that every dollar in an economy will be spent and people on the bottom of the wage scale spend every dollar locally


minimum wageRED DEER, Alta. Oct. 6, 2016/ Troy Media/ – Not long ago in Alberta, workers with minimal training and not much experience wouldn’t crawl out of bed for a job that paid less than $80,000 a year – not counting substantial overtime.

In the northern part of the province, young people working in a fast-food business would simply walk out their employer’s door to the restaurant down the street and sign up for better pay – no interview required.

Good times, right? During the boom, even small Alberta businesses managed to make money paying their workers substantially more than the province’s new minimum wage of $12.20 an hour.

We haven’t seen the price of a burger and fries, or a double-double drop that much since oil dropped below $50 a barrel. But minimum wage is apparently too much to pay for many Alberta small business owners.

The Canadian Federation of Independent Business has pulled out the same notes they used five years ago to warn of rampant business closures, or of drastic cuts in jobs or hours, if the legal minimum wage is raised.

News outlets, including [popup url=”http://www.troymedia.com/tag/minimum-wage/” height=”1000″ width=”1200″ scrollbars=”1″]Troy Media[/popup], have given them plenty of space to argue that now is not the time to make a law that would ensure that people working full-time could actually live on their salary. Not that $12.20 an hour is a living wage in most Alberta cities, but that point has been lost in the rhetoric.

Besides, we were told, Alberta has very few workers earning minimum wage and, anyway, they are mostly teenagers living free in their parents’ homes.

That might have been true in 2010, when Alberta had just 22,200 workers on minimum wage, according to Statistics Canada. But by 2015, that number had blown up to 51,600.

And according to Alberta Labour Department figures, more than 296,000 Alberta workers earn less than the nominal living wage of $15 an hour – the minimum wage mandated for Oct. 1, 2018. In some communities, the news is even worse: the Calgary living wage is calculated to be $17.29 an hour.

Almost 80 per cent of Alberta’s minimum wage earners work permanently at that pay level. Fifty-four per cent of them work full-time and 38 per cent of them have children to support. Not surprisingly, 62 per cent of them are female.

This is not just a small business problem. Government figures say 58.5 per cent of people on minimum wage work for employers with more than 100 workers.

We really should be talking about the suspect small-business models built around a low minimum wage. If the success of your business includes paying wages that require a full-time employee to rely on a food bank month to month, maybe it’s your business model that’s wrong.

The grocery store managers and thrift store workers in Alberta all know exactly when government support cheques come out every month. They can track the date by their sales figures.

A basic text on economics will tell you that every dollar in an economy will eventually be spent. For people on the bottom end of the wage scale, every dollar earned is spent locally.

In other words, if a poor person gets another dollar, it doesn’t take long for a rich person to obtain it.

So those who continually protest a fair minimum wage have failed to present a convincing business case.

All the money workers earn gets spent (and many spend much more, and fall deeper in debt). And that money is spent at the businesses whose owners resent paying a higher minimum wage. The money goes around and around. That’s simple economics.

At a time when the disparity of income between rich and poor has become the root of some rather dismal politics in North America, I can’t see how the moral importance of workers being able to live on their pay levels is wrong.

Especially when it’s clear that when there’s more money at the bottom, it just flows upward all the faster.

Greg Neiman is a freelance editor, columnist and blogger living in Red Deer, Alta. Greg is included in Troy Media’s Unlimited Access subscription plan.

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