Minimum Wage Debate

Pro: The minimum wage across Canada should be increased to at least $10. 00 an hour. This would allow some of the working poor to live above the poverty level. In some cases, the current minimum wage is not enough to live on, and extra assistance is necessary. In some cases the minimum wage is so low that it encourages people to rely on social assistance. Frank Field talks about this in his book The Minimum Wage: “Indeed, a low paid worker who works full time may in some instances be worse off than if unemployed.

This is not because the benefits paid to the unemployed are large; in fact, they are officially regarded as the minimum on which a family can manage to live. ” (1984: 42) So, there are other reasons for the unemployed being better off than low paid workers. For example, a person on social assistance may make as much as a person who works, but also have the added benefit of a good health care plan and sometimes even transportation and other expenses paid for. In a circumstance such as this, why would anyone take a job at the sacrifice of losing these other valuable resources? They wouldn’t.

Even if a minimum wage job pays only a fraction more than social assistance, one still needs to factor in other related expenses that will not be taken care of, as it may be on social assistance. Taxes, health care, and many other expenses can be factored into taking money away from the low wage worker, whereas a person on social assistance may have to worry less about these things when it is covered. In some cases, the government has realized that this is the case and has implemented a new “STEP” program to add to the resources of people who want to work, but find that it is better to stay on social assistance for financial reasons.

The “STEP” program, in Ontario, allows people on social assistance to work and still receive partial assistance from the government to help bridge the gap that may prohibit them from taking on a low-wage job. In this case, a person could possibly make up to $200 extra dollars than they would if they were working without assistance or only on social assistance. However, this same system is not in place for those on unemployment benefits. In fact many people make more money on unemployment benefits than they would if they were to take a pay cut and look for a low-wage job.

Here is where the social safety net falls apart again. What’s worse is that these people seldom become able to support themselves totally without some form of assistance, or they end up in a “Poverty Trap”, because of their social status. The minimum wage is characteristic of certain types of people. This is a problem because these people find themselves in a position that they can seldom move out of. Generally, the minimum wage hurts minorities and low wage workers, allowing the rich and powerful to maintain control over the poor for generations.

Most minimum wage workers are permanently stuck at minimum wage due to their status: “Overall, individuals working at or below the minimum wage were likely to be women, young people, students and part-time workers. Some were working to finance their education or support their families, while others were older workers looking to supplement their pension. ” (Statistics Canada, 2003) Immigrants are also a majority of low wage workers left to struggle on minimum wage, even if they have a high education: “Because so many new immigrants are not finding jobs they are qualified for in Canada, they are often forced to find alternate low-paying jobs.

According to Statistics Canada, 60 per cent of new immigrants worked in a different field than they had before arriving in Canada. ” (CBC news: 2004) If not only stuck in a minimum wage job for status reasons, it could also be that some people simply can’t risk losing the low paying jobs that they have, out of necessity for survival: “However, some 27,000 heads of family with no spouse were working for minimum wage or less. Although they made up only 5% of all minimum-wage workers, almost all had at least one child under the age of 18 to support. In addition, some 31,000 minimum-wage workers had a spouse who was not employed.

” (Statistics Canada: 2003) So, the myth that says that minimum wage workers are solely teenagers out to make money for college, doesn’t ring true at all. A lot of minimum wage workers have to be able to afford to take care of their families. It could be that there is a single parent at the head of the household, or that only one parent is able to work: “According to Statistics Canada research, single-parent families have an average income of $29,485, almost half of the national average of $43,231. ” (CBC news: 2004) This causes an important problem, especially in a society where single parent families are on the rise.

The low minimum wage accounts for one of the main reasons for child poverty in Canada: “One in six children, or 1,139,000 children, lives in poverty in Canada according to Campaign 2000. ” (CBC news: 2004) These people live in poverty because they cannot afford to live. The minimum wage is too low. They can not afford childcare for their children so they can work, because childcare costs in most provinces are too much for a minimum wage worker to afford. And that is not the only expense that a minimum wage worker has to worry about. Costs are rising everywhere for everything.

Hydro rates just increased, gas rates increased, and even worse shelter costs are often too expensive as well: “According to the Canada Mortgage and Housing Corporation (CMHC) “the cost of adequate shelter should not exceed 30 per cent of household income. Housing which costs less than this is considered affordable. ” (CBC news: 2004) Even the UN has made a statement on how people in Canada are simply unable to afford shelter costs: “The Committee is concerned that provincial social assistance rates and other income assistance measures have clearly not been adequate to cover rental costs of the poor.

In the past five years, the number of tenants paying more than 50 per cent of their income towards rent has increased by 43 per cent. ” (CBC news: 2004) If the minimum wage is not increased, many people could face homelessness, and the poverty situation will get worse as inflation continues to rise. Many economists believe though, that increasing the minimum wage would bring inflationary pressure and limit economic growth. Economic factors often leave out some important details and may not be completely accurate. The problem with many of these economic theories is that they can not be scientifically proven.

In, The Case of the Minimum Wage, Levin-Waldman discusses how minimum wage is determined more by political and social issues rather than economic ones. This can be seen by the voting trends throughout Canada. While there are some valid points in economic theories, they can not actually be proven accurate. On an economic basis, you would think that if you pay a person more, they will spend more. If a person spends more, then this would actually strengthen the economy, not destroy it. Some say that the hand of the market will drive the economy, but this is a straw man argument, because something has to drive that hand.

The idea that there is an invisible hand that rules the market might work in a Harry Potter novel, but as an actual economic model, I think it’s a real stretch from an actual scientific model. The minimum wage in some countries are higher, and those countries, ie, The United States, are actually prospering and some are more economically stable than Canada is. So the minimum wage must not be the only factor in determining what will alter economic growth in a country. One main characteristic of a third world country, is that the people cannot make a decent wage in order to live.

This creates poverty that slowly grows, and the economy of that nation weakens along with this trend. Looking at this model, one would think that Canada is on a path to economic destruction if the minimum wage is not increased. This is mentioned by Levin-Waldman: “In the Wealth of Nations, Adam Smith suggests that the wages worker earn, especially relative to those in other countries, reflect the wealth and overall strength of the economy. A nation that pays its workers poorly may in part be symptomatic of a nation that either stands still or is in decline. ” (2001:184)

Con: Increasing the minimum wage would bring about inflationary pressure and limit economic growth. Market forces should be what determines the minimum wage. Increasing the minimum wage would bring inflationary pressure and limit economic growth. As prices for goods and services that we consume increase, inflation is the result. The inflation rate is used to measure the rate of change in the overall price level of goods and services that we typically consume. While inflation is a regular annual occurrence in modern economic systems, it only becomes a policy concern when reaching unacceptably high levels.

As long as we properly anticipate inflation, we can prepare and absorb much of its shock. Problems occur when inflation is greater than we predicted, when it is unanticipated. We can conclude that inflation may cause many economic distortions, including slower growth and higher unemployment. Many policymakers advocate attempting to sustain the lowest possible rate of inflation. One way of maintaining the economy is by setting a minimum wage. Increasing a minimum wage would have many side effects on the overall economy, so economists discourage raising the minimum wage in order to keep inflation down and thereby encouraging economic growth.

Economic growth explains the expansion of an economy’s capability to produce goods and services, and is usually accompanied by higher incomes: For a long time there has been a general understanding between economists that the minimum wage causes fewer jobs to exist than if there were no minimum wage. People who have defended the minimum wage in the past have not tried to dispute the unemployment effects of the minimum wage, but argued that generally the working poor were better off. The higher incomes of those with better paying jobs offset the lower incomes of those without jobs, as a result of the minimum wage.

Economic calculations show that increasing minimum wage would not actually give people a higher income, since there are other factors such as inflation that are involved. As the minimum wage increases, so does inflation. If an employer has to pay higher wages, then the price of the product or service being produced will have to cost more in order to pay the employee. In return the prices of all goods and services will rise, and the person earning higher wages, makes no gain. In some instances, a pay hike would not make a livable wage, but in fact could make it worse.

People who normally get tax breaks for having a low income, would now end up paying more in taxes and may actually end up making less money overall. Higher minimum wages force employers to cut back on training, which deprive low wage workers of any chance of long-term advancement, in return for a small increase in current income. Having higher wages for low-paid positions might also discourage workers from gaining new skills. In most circumstances, minimum wage workers may start off at minimum wage and then as time goes on and their skills are refined, they end up getting paid more.

So while many people may start off at minimum wage, many of these people don’t necessarily stay fixed at minimum wage. There are many minimum wage jobs that offer advancement opportunities. Fewer jobs would exist as the minimum wage increases. This would mean fewer jobs and more unemployment as inflation rises. Job loss is simply based upon the math of how much firms have to spend. If the minimum wage is bumped to $10, and a firm has $1200/week budgeted for a new hire, they’ll hire 3 full time employees.

If the minimum wage is $6, they’ll hire 5 full time employees. The $4 difference in minimum wage just cost 2 jobs. Companies cannot pay someone with money they don’t have. Businesses and corporations that could not afford to pay higher wages would be likely to go elsewhere in order to pay cheaper wages to employees. Some evidence of this can already be seen as larger companies use workers from third world countries in order to pay less wages and gain a larger profit. This would also curb economic growth due to increasing the cost and lowering the supply of labour.

Raising the minimum wage could also raise employment barriers for people with little or no work experience or formal education: if a worker’s labor is not worth the minimum, he may not find employment at all. A large problem with the arguments presented in favour with an increase in the minimum wage, is that the focus is primarily on those directly effected by the increase. The argument should be explaining how this relates to the labour market in general, and widen the focus to include all other matters related to the minimum wage increase.

How the increase will effect global issues, political issues, and how it will effect all types of workers and the unemployed, should be addressed as well. Levin-Waldman discusses this in his book: ” Poverty arguments offered in favour of minimum wage increasesare weak because their focus is too narrow. Unless the issue is framed within the context of a general labour market issue, it will not draw the type of political support necessary to result in meaningful and effective change in a political system that requires a great groundswell of support before any actions are to be taken.

” (2001:163-64) Conclusion There are some very convincing arguments both for and against the minimum wage increase. On one hand, there are many economic theories that suggest that increasing the minimum wage would bring down the whole economy of this country. Soaring inflation, and job loss would be apparent, and it could all be for nothing. People making higher wages might not actually make any more headway than they did previously, due to increasing inflation and lack of government support such as tax breaks.

Low skilled employees would miss out on training opportunities, and may even opt out of those opportunities altogether. On the other hand, all these economic factors are not necessarily accurate or scientifically proven. Political and social issues drive the minimum wage argument. The main reason why more is not being done in support of the minimum wage is that the focus of the arguments are too narrow. More information is needed to show how this will affect the overall labour market in order to gain political support.

At this point, it is more than obvious that the minimum wage must be increased to help those living in poverty in Canada. The statistics show a great need for better wages in low skilled, low paying jobs, if we hope to keep our economy thriving. The problem lies in the portrayal of how and why this must be accomplished rather than if it should be accomplished at all. There definitely needs to be a substantial increase in the minimum wage to as much as $10 an hour if we want to keep the high standards of our economy flowing.