On the one hand, provincial governments are moving to higher and higher percentage increases in minimum wage levels, in an effort to ‘legislate’ prosperity or at least, higher levels of income for Canadians. On the other hand, businesses are reacting, well, in a business-like way, by cutting costs and jobs. After all, the other option, raising prices, really isn’t an option. Consumers are very price-sensitive, and companies know that a price increase of any magnitude many not just cost them a few customers, it will cost them market share, and, possibly, the business entirely.
The upshot of all this is fewer and fewer jobs at the lower and entry levels of the economy, where we need them most. Remember, there are explicit barriers to higher-wage jobs, particularly in the public sector, or near-public sector, where seniority, accessibility and exclusivity dominates. As a result, the inequalities and disparities between high-wage employees and low-level workers is only becoming stronger and more pronounced.
Surprisingly, at a time of high unemployment, labour shortages are a reality in Canada. People who want to find a desired position or type of work can’t, and people who want to hire workers can’t find the workers they need to fill jobs. We need to understand why that is and we need to understand the role various factors play in affecting this outcome. Minimum Wage is not the only factor we need to look at, but it is definitely a factor.
A binding minimum wage acts as a price floor in the market. At a higher minimum wage, more workers should be willing to work. Unfortunately, what is a positive for one side of the equation is a negative for the other. That is, fewer employers are willing to hire at higher wage levels. [i] It gets worse. In our complex and multi-faceted socio-economic environment, a higher minimum wage does not necessarily provide sufficient motivation for available workers to seek work.
This is an important dialogue – an important discussion we need to have – mindful of the political biases we all bring to the table, but cognizant of the consequences of not allowing ourselves to agree, disagree, argue and persuade.
To truly understand and influence our shared standard of living, of sustaining people at all income levels, and providing economic motivators that address labour shortages and surpluses, we need to establish a National Labour Strategy. That begins with a national dialogue that involves consultation, assessment, forecasting and modelling. Simply increasing minimum wage arbitrarily, without consultation, to meet a political objective, is irresponsible.
We need leadership. Leadership that transcends politics. We need guidance. Guidance informed by experience and expertise. We need hope. Canada needs a National Labour Strategy. We need to put provincial politically inspired measures on hold pending the outcome of this national conversation. Our economic future is simply too important. Canadians are a pragmatic people. We know how to compromise when compromise provides the best result for the most people.
[i] Joseph Marchard, University of Alberta, Working Paper Thinking about Minimum Wage, April 2016
Paul McKay is a consultant @ Restaurants Canada. This article was originally published here.