Minimum wage Up in BC
The B.C. government has announced a plan to raise the minimum wage in B.C. to $15.20 by 2021, they will raise it in small increments annually over the next 4 years starting June 1st. The raises are as scheduled:
June 1st 2018 $11.35 to 12.65 (+1.30)
June 1st 2019 $12.65 to13.85 (+1.20)
June 1st 2020 $13.85 to 14.60 (+0.75)
June 1st 2021 $14.60 to15.20 (+0.60)
The raises being spread out over several years mean that there will be less of a shock to the employment market. Currently every minimum wage in Canada ranges from $10.85 (N.S.) to $14.00 (Ont.). 8 of the 10 provinces have a rate within a $0.50 margin from $10.85 to $11.35 while Alberta and Ontario both have plans to raise their minimum wages to 15$ at some point in 2018. At face value raising the minimum wage is good for the poorest amongst us. It allows for an increases in quality of life for the bottom end of a labor market, it provides more youth with the opportunity to seek higher education and helps others meet the soaring housing costs. There are, however, real concerns about the viability of small businesses and a raise in the unemployment rate from raising the minimum wage.
There is also often a sentiment that minimum wage jobs should not feel entitled to a higher wage and that if they want more money they should improve their skill sets and demand higher wages. While some may feel that teenagers working in corner stores do not deserve 15$ an hour it is important to understand the demographics of the minimum wage labor force before making assumptions regarding the utility of those funds. Only 18% of minimum wage earners are teenagers, with 39% being above the age of 35. Additionally 58% are working full time. Jobs earning under $15/hour represented 25.5% of all employment in 2015 according to Statistics Canada. These numbers paint a different picture about the nature of minimum wage workers in B.C.
Increasing the minimum wage does raise the potential for job losses in a few ways. First employers facing very small profit margins such as the food service industry will face an even tougher situation. Generally labor costs range from 25-35% of total expenses in the food industry with nearly all earners falling beneath the 15$ mark before gratuities. This means that food industries will see an increase from 0 to 8.5% in expenditures depending on how well their employees are currently paid. Increasing minimum wage also makes automation more viable, the cost of employment going up means companies will be willing to spend more to replace that employment.
The amount that unemployment will rise is difficult to predict as there are far too many other variables involved in the equation. In 2011 when the minimum wage was raised from 8$ to $10.25 minimum wage employment saw a decline of 1.6% over 3 years. While the 2011 raise occurred over the duration of a year, the planned annual increase rates of this raise will certainly have a smoothing effect. With no major shock to the market we are less likely to see a dramatic reduction in employment.
The amount of $15.20 will mean that a single employee working full time will not be under the poverty rate anywhere in B.C.. While the exact objective of the minimum wage has never been tied to an economic metric directly, poverty reduction and a basic standard of living have been the implicit primary objective. While B.C. has seen some of the highest increases in GDP and employment rates over the past few years it still holds the second highest poverty rate in the nation.
While raising the minimum wage will reduce poverty of those who maintain jobs there will invariably be some who do not. The market for minimum wage employment is rather abundant in the urban centers of BC with many workplaces operating in a permanent state of being understaffed. In these locations a loss of jobs will simply mean a lateral move for employees and they will maintain some form of employment. For workers in small towns $15.20 may be a more daunting prospect. In a weak labor market where unemployment is already high raising the minimum wage has the potential to exclude workers from the market who would be willing to work for a lesser wage. The discrepancy in the cost of living accross the province is the most challenging component of a minimum wage increase, while 15$/hour may be the requisite for a basic standard of living in Vancouver this may not be the case in Williams Lake and could exclude willing workers from the labor market.
Labor markets are a tricky ordeal and the rate of a minimum wage is one of many factors that heavily influence the market. With continued increases in GDP and consistent other market factors a $15 minimum wage is likely to have little impact on the employment rate and a significant impact on poverty reduction. Should these factors falter, or if industry dependent towns see a localized depressions then the policy may become a barrier to employment.