Minimum wage: What’s good for the goose is good for the gander

Behind theNumbers.ca
December 18th, 2013.   Kaylie Tiessen

Ontario’s minimum wage has been frozen since 2010. It’s the second longest period minimum wage workers have gone without a raise since 1969.

Oftentimes discussions about how much and how often to raise the minimum wage get positioned in relation to potential harm to business: how much can businesses bear to pay for an hour of labour before they are negatively impacted?

It is becoming increasingly clear that by keeping wages low managers are, in fact, undermining their own bottom line. An increase in the minimum wage can actually be good for business.  Low-wage workers who have enough money to meet their household needs – you know, like paying the rent AND buying food – tend to spend every extra dollar they earn. Pumping that money back into the economy, through consumer spending, fuels growth and increases sales at local businesses.

In Ontario, a full-time minimum wage worker earns 25% below the poverty line, effectively unable to make ends meet.  An increase in their wages would mean a boost to both their individual well-being and that of the business they work for, reducing stress at home and boosting their productivity on the job.  An undernourished worker who is worried about how to pay the bills at the end of the month is unlikely to be contributing all he or she could to the overall success of a business.

The financial health of individual workers and the overall health of an economy are inextricably linked.  Robust economic growth cannot be attained without a hearty dose of consumer spending to grease the wheels of our economic engine.  When businesses allow the wages of a growing share of the workforce to erode, they contribute to an overall decrease in the spending power of their own customers, slowing down economic recovery efforts from the 2008 recession.

Instead of starting with the question “what businesses are willing to pay?”, why don’t we start with how much people need to earn to meet their needs and actively participate in the economy. A $14-an-hour minimum wage would ensure a full-time minimum wage worker earns 10% above the poverty line.  At $14.50, a minimum wage worker would earn within 60% of the average full-time worker in Ontario.

You know what else a $14 minimum wage could do? It could help ensure that every job is a good job. Shouldn’t that be the economic goal?

To find out more, check out CCPA Ontario’s minimum wage fact sheets, which outline the workers’ case for a higher minimum wage, the business case for a higher minimum wage, and a road map for getting to a wage that makes sense for everyone.

Kaylie Tiessen is an economist with the Canadian Centre for Policy Alternatives’ Ontario office.

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