Minimum wage scare

Posted on April 1, 2008 in Debates, Governance Debates, Social Security Debates – comment/editorial – Minimum wage scare
April 01, 2008

Some social activists are calling it “recession spook” – the talk of a looming economic downturn and the subsequent need to rein in the province’s anti-poverty agenda.

In that vein, some economists have warned that yesterday’s 75-cent increase in the minimum wage to $8.75 an hour will lead to job losses. But the evidence for that is inconclusive, at best.

Even with yesterday’s hike, the minimum wage in real terms is still below the 1973 level ($8.86 in today’s dollars). And if minimum wage jobs are lost when the wage rises in the numbers some economists predict, they should consequently increase when the wage goes down. But when the Mike Harris Conservatives kept it frozen at $6.85 for eight years, effectively cutting it by 15.4 per cent, jobs did not go up in the same numbers those same economists would have predicted.

The provincial Liberals ended the freeze when they took office in 2003, but the increases in the minimum wage have been relatively modest under them. That’s why the government should stick to its pledge to raise the minimum wage to $9.50 next year and to $10.25 by 2011. The increases affect about 200,000 vulnerable Ontarians, mostly in the service and agricultural sectors. They should not be forced to bear the brunt of a slowing economy.

As social policy expert John Stapleton points out, until the last recession in the early 1990s governments routinely increased spending on social programs during economic downturns. Ontario introduced the welfare act during the 1957-8 recession, and in the mid-1970s downturn, the Conservatives under William Davis regularly increased the minimum wage and raised social assistance rates four times.

The McGuinty government has taken the right approach in pledging regular, incremental increases so that workers earn more and businesses aren’t hit with a massive wage increase all at once.

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