Minimum wage hikes are ineffective at reducing poverty: report

An Alberta jobs report released last March confirmed 26,000 job losses for minimum wage workers under the one-term NDP government, with those under age 24 bearing the brunt of it.

Minimum wage hikes are ineffective at reducing poverty: report
The Canadian Press / Sean Kilpatrick and The Canadian Press / Todd Korol
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Several reports have cautioned against rampant minimum wage hikes as a poverty reduction strategy.

An Alberta jobs report released last March confirmed 26,000 job losses for minimum wage workers under the one-term NDP government. Then-premier Rachel Notley increased the minimum wage by 47% from $10.20 to $15.00 an hour.

The wage hike led to “sharp increases in labour costs at a time when businesses were most poorly positioned to do so,” according to an expert panel.

“One person lost their job for every ten people who got a raise due to the [increase],” said University of Alberta economist Joseph Marchand, who chaired the nine-person panel.

Younger workers (15-24) bore the brunt of the minimum wage hikes, a reality the Canadian Federation of Independent Business (CFIB) addressed in a subsequent report.

Researchers said only 1.5% of minimum wage workers nationwide are single parents. An estimated 37% are teenagers and the majority (57%) are under 25, reported Blacklock’s Reporter.

“Most minimum wage workers are young people entering the workforce with a high school education or less, living with their parents,” said a Federation report Affordability, Minimum Wages And Living Wages: Striking A Balance For Small Businesses

“Only 16% of minimum wage workers remain employed at that rate for over five years,” it said. Almost half (42%) remain in the same job for less than a year.

According to the Federation, most minimum wage work is “transitional,” often serving as a starting point for young workers. “Notably 62 percent of minimum wage workers engage in part-time employment,” it said.

The research follows a 2021 Labour Department report to the Senate Social Affairs Committee, which said the “link between minimum wages and poverty is relatively weak.”

The federal minimum wage indexed to the Consumer Price Index is currently $17.30 per hour. Some 30,000 employees in the federally regulated private sector work at minimum pay such as call centre employees at banks.

“Individuals in many poor families work very little or not at all, so changes in minimum wages have little if any impact on their family income,” wrote the department.

Shifting from inflation-based wage hikes in Alberta skyrocketed youth unemployment from 9.2% to 11.5% Rebel earlier reported.

“There are many different ways to respond to that,” claimed Marchand. Minimum wage increases are considered ineffective in addressing poverty, according to CFIB data and labour department staff.

It suggested Alberta expand the current minimum wage differential for workers under 18 to $ 13 an hour, a change introduced by the Alberta government in 2019.

Rebel News reached out to the Alberta government for comment. Affordability spokesperson Ashley Stevenson claimed they are “taking action to support Albertans with the rising cost of living.”

“Alberta’s low-tax, business-friendly environment, combined with our government’s ongoing red tape reduction and affordability measures, are helping keep life affordable for everyday Albertans,” she said. “Alberta compares favourably to other provinces on affordability.”

Of 4,104 entrepreneurs in a CFIB questionnaire, 89% said governments are not effective at addressing cost of living concerns.

“Business owners overwhelmingly feel governments are not adequately considering their perspectives in addressing the rising cost of living with many bearing the burden themselves,” wrote the Federation.

Stevenson did not specifically address the impacts of successive minimum wage hikes in driving up costs.

“We have the lowest taxes in the country, including lower income tax rates and no provincial sales tax,” she said.

Alberta workers continue to outearn every other province, reads the statement. Average weekly earnings in Alberta remain the highest in Canada ($1,284), or 6.7% greater than the national average ($1,204).

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