September 30, 2016

4 reasons raising minimum wage hurts the poor

Brian LilleyRebel Co-Founder
 

The fight for 15, that’s what the campaign to raise the minimum wage to $15 an hour is often called and it’s portrayed as a way to help the working poor, those working jobs that pay minimum wage.

On October 1, Ontario, Prince Edward Island and Saskatchewan will all raise their minimum wages, other provinces have raises set for next April.

We are told that doing this will lift people out of poverty. But does it work? Study after study says no but that doesn’t stop progressive politicians from making the promise.

I used to believe the promise too back when I qualified as working poor but now I know these types of policies just hurt the people they are intended to help.

Watch as I explain why.

I’m not advocating keeping wages low and want people to earn as much as they can to have a good income, to move up the economic ladder.

But the idea that having governments force an increase will help is a false one and it’s one that we should move away from if we really want to help the poor.

Comments
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commented 2016-10-01 19:06:45 -0400
“George Dyer commented 1 hour ago
This is not a solution to a problem.
The minimum wage is intended, and suitable, for the likes of a high school kid bagging groceries for an hour or two after school, or retired seniors wishing to supplement their pension income whilst getting out and meeting people by greeting them at Wal-Mart, for example.”

The problem is, though, that that’s not how the economy works anymore. Although it may have historically been true*, it’s not an accurate reflection of the economy now where the unskilled labourer has little choice but retail work. Some people are going to end up on the bottom rung of society, almost by definition, and it may not be their own fault.
  • It may have historically been true, though I doubt this. Historically, minimum wage was much higher relative to both median wages, and GDP. It’s only since Reagan era trickle-down economics, globalism, and neoliberalism took hold that minimum wage was left stagnant while inflation ate away at it. These same parallel trends also reduced the ability to climb out of the working class poverty it caused.
commented 2016-10-01 17:54:01 -0400
This is not a solution to a problem.
The minimum wage is intended, and suitable, for the likes of a high school kid bagging groceries for an hour or two after school, or retired seniors wishing to supplement their pension income whilst getting out and meeting people by greeting them at Wal-Mart, for example.
It shouldn’t be argued that it’s “not a living wage”. A living wage is earned by doing work that is high in value to society and worth the $15 (or more) per hour.
If those jobs are in short supply, then any government that legislates a $15 per hour minimum wage is achieving nothing more than forcing businesses into issuing undeserved welfare cheques, and any government in this country that supports and enacts such legislation should resign in shame for the damage they have obviously caused to our industry and commerce.
Truly improving the standard of living for any one individual, group, community or nation is achieved only by increasing productivity. There is no other (legal) way.
One person’s wage increase is another person’s price increase.
commented 2016-10-01 11:30:51 -0400
“Drew Wakariuk commented 11 hours ago
Andrew point me to the studies that say high taxes help the economy?
No. But that’s not what we are discussing…

Drew Wakariuk commented 11 hours ago
Andrew costs get passed on , that is called reality. The raise to $15 will put many workers into a taxable bracket , what is the point of making more if they take it?"
That’s actually called speculation.

If the link is so clear cut, then there should be barrels of economic studies pointing out the existence of such a link, with a high degree of confidence. After all, minimum wage hikes are not exactly an uncommon scenario;. They said the same thing a decade ago when Ontario first proposed a ten dollar minimum wage … or in cities like Seattle or New York which have very aggressive minimum wage laws. Any one of these would be a useful case study… but yet, there still isn’t conclusive evidence that “common sense” models (which is what you propose, nothing more than a thought experiment or dramatically simplified, non-empirical economic model) actually represent what really happens.

What actually happens, is that your direct model (higher wages = higher cost) ignore a number of subtle variables, that actually turn out to be quite important at the macroeconomic level. Is it true that it (at least transiently) impacts a particular business? Obviously, it will. But … zoom out a bit, and the consequences are far harder to determine. At the scale of the entire economy of a city, a province, or a country … the gains and losses seem to roughly balance out.

Instead, we have idle speculation by laypeople (which is the category most comments here fall into), generally driven more by principle than economic theory. Are you a small government advocate? You’ll probably oppose minimum wage hikes, not because of economics, but because of political stance and opinion on government’s role in the economy. The economic theory comes later, and seem to be set up to justify a pre-existing opinion rather than the other way around.

As for the economists? They don’t know either. The studies find weak and often contradictory correlations. The biggest influence in the debate is invariably confirmation bias; given a 50/50 split of positive vs negative findings, debaters tend to remember the studies agreeing with their preconceptions and find confirmation that may not actually exist. This which tells you how strong the underlying evidence really is… which is, that there’s nothing definitive either way. Minimum wage hikes are not economically destructive. They’re probably not hugely beneficial either.
commented 2016-10-01 00:31:53 -0400
Andrew point me to the studies that say high taxes help the economy?
commented 2016-10-01 00:30:56 -0400
Andrew costs get passed on , that is called reality. The raise to $15 will put many workers into a taxable bracket , what is the point of making more if they take it?
commented 2016-09-30 22:22:06 -0400
“Ruth Bard commented 11 mins ago
Stupid, stupid, stupid. No matter how high the minimum wage is set, it’s still minimum wage. After a flurry of economic upheaval, goods and services will be proportionately higher-priced, and your buying power will be unchanged. And unemployment will be up. What is it about politics that makes factual information completely irrelevant? "

Since you claim it’s factual, can you point me towards the studies that conclusively demonstrate that?
commented 2016-09-30 22:09:36 -0400
Stupid, stupid, stupid. No matter how high the minimum wage is set, it’s still minimum wage. After a flurry of economic upheaval, goods and services will be proportionately higher-priced, and your buying power will be unchanged. And unemployment will be up. What is it about politics that makes factual information completely irrelevant?
commented 2016-09-30 19:56:39 -0400
D.H Chaisson said, "Good video by Lilley here. Did his homework on this one. "

Interesting you praise Brian Lilly for his research but condemn Faith Goldy for her research (regarding the school in Fredericton) when she did equally as good research or even better.
commented 2016-09-30 19:25:46 -0400
Does it stand to reason that having no minimum wage would help the poor? Would this create more of a bidding war for unskilled entry level type positions?
commented 2016-09-30 18:24:39 -0400
When the first rung on a ladder is too high for inexperienced people, they may never have a chance to climb it. Minimum wage increases, kill start up businesses.
commented 2016-09-30 18:21:25 -0400
Good video by Lilley here. Did his homework on this one.
commented 2016-09-30 18:01:12 -0400
Unfortunately socialist ideology trumps facts. Recently saw an article about a robot that can flip hamburgers.