The term, “minimum wage” refers to a lowest payment that an employer is bound to pay to its workers. Today minimum wage is made compulsory in more than ninety percent of nations including Canada where workers are demanding to increase minimum wages for a long time. Minimum wages are revised by governments in order to met growing needs of workers. There is a difference of opinion on the issue of increasing minimum wages among people of Canada. Employers and employees also have difference views on the issue of increasing minimum wage. This paper intends to discuss the issue of minimum wage along with discussing pros and cons of increasing minimum wages.
Workers have been demanding to increase minimum wages in different parts of Canada. Several Workers’ unions have accelerated their demands and demonstrated with full force on the roads of Ottawa and Ontario in last few months. Since this issue is directly related to masses, political parties have also jumped in the issue and gave it a new dimension by fueling it. Mr. Mulcair, a senior leader from National Democratic Party vows to increase minimum wages by fifteen dollar per hour. Mulcair says, “We think it’s important to send a signal,” he adds “It is a good idea economically to put money in people’s pockets” (McParland).
Corporations have different views on the issue. They have started fear mongering on the issue. They say that any increase in minimum wages would compel companies to offload their work forces. It will increase unemployment and economy will be affected in a negative manner. On the other hand, workers’ unions have their version of the story. Workers say that increase in minimum wage is due since a long time. They say that it has become difficult to sustain for workers because of price rice and low wages. They say that money inflation and price rice has made their life difficult and they cannot sustain on current wages.
Pros and cons of increasing minimum wage
The issue of increasing minimum wage is driven by vested interests of all associated parties. Corporations and employers do not want the minimum wages to be increased while workers are adamant to get increased minimum wages. Apart from related parties, economists and other scholars have difference of opinion on the issue of minimum wage. They have neutral opinion on the issue yet there is a difference in their opinion. Some advocate increasing minimum wages while others oppose such steps. Both of these people have their logics and reasons for their claims.
Canadian government is annually revising minimum wage by considering different economic factors. Government decides minimum wage rate for four categories along with general minimum wage rate. These four categories i.e. student, liquor server, hunting & fishing guide, and house workers noticed an increase of around 32 to 33 percent from year 2006 to 2010. Student minimum wage rate gone up from $7.25 per hour (2006) to $9.60 per hour (2010). Similarly general minimum wage gone up from $7.75 per hour (2006) to 10.25 hour (2010). The minimum wage rate in Canada varies from state to state, however, it ranges from $10 per hour to $11 per hour depending upon the state (Minimum Wage: Ontario Ministry of Labour).
The debate on the issue of minimum wage intensifies with the arguments of its supporters and opponents. According to a report, presented by Canadian Centre for Policy Alternatives, current minimum wage of Ontario is responsible for dragging people in poverty. People who support or demand increasing minimum wage, say that minimum wages should be increased in order to provide workers a decent living. CCPA suggests the minimum wages to be raised $14.50 per hour. The minimum wage was $ 10.25 / hour in Ontario till 1st June 2014. Now it has been revised to $11 per hour and workers are demanding to make it $15 per hour (Minimum Wage: Ontario Ministry of Labour).
Mulcair (NDP Leader) supports the idea of minimum wage of $15 per hour. The leader mentioned that it is important to raise minimum wage in order to improve the economic condition of poor middle class. Presently in Canada household debt is significantly high, and number of jobs for middle class is also not increasing. Increase in minimum wage will help in saving the economy and making it more robust. Current minimum wage is not sufficient to fulfill even the basic needs related with food, education, health, and shelter of the people who work really very hard. Therefore, it is important to raise minimum wage up to the level so that it can fulfill basic needs of the poor people (CBC News).
In Canada, young women age 15 to 25 forms significant portion i.e. 60 percent of workforce working at minimum wage (CBC News). Any increase in minimum wage rate will facilitate the education of young girls and allow them to empower their family. Increase in minimum wage will directly impact the purchasing power of the worker, hence more demands of goods in the market and better flow of money into the market. An increase in minimum wage will help both people and economy of the nation. Various studies suggest that Canada is facing all time high income inequality. According to the studies Income gap is widening significantly in America and income of lower and middle class in Canada is stagnant for past various years. The studies also claim that prices of goods are roaring and making difficult for poor people to get even basic goods and services.
Boeri (2012) in his article talked about the importance of setting right wage by the economists. According to the author, minimum wage can be set by government authorities or by using collective bargaining agreements. Minimum wage should be set by understanding requirements and concerns of the labors because they are the one who get impacted by it. The study also analyzed the minimum wage data of 68 countries including Canada. It was observed that the minimum wage established by the government authorities are lower than what is set in collective bargaining agreements. This shows a need to revise the minimum wage according to the actual economic conditions, inflation and basic requirements of the labor (Boeri).
On the other hand, there are people who believe that increasing minimum wage affects the Canadian economy in negative ways. One of the most common arguments given by opponents of increasing minimum wages is that it causes job loss and affects Canadian economy in negative ways. Charles Lammam from Fraser Institute says, “Evidence shows that increasing the minimum wage reduces employment opportunities among young and low-skilled workers. Canadian-based research finds that every 10 per cent increase reduces employment by between 3 per cent and 6 per cent” (Voiceonline).
Lemiuex (2007) in their research study analyzed the factors that contributes towards increasing income inequality and why income inequality is highly concentrated towards high end of wage distribution. The author mentioned that in developed country like Canada wage inequality is significantly high because companies are paying huge money to top executives and paying low wages to the labors. It is also observed that majority of multinational companies have shifted their manufacturing operations to developing countries that involve intensive labor work. Shift in operations to developing nations also increased bargaining power of the companies which result into low demand of labor incase increase in wage (Lemieux).
There are many other people who express their opinion on the issue of increasing minimum wages in a similar way of Charles Lammam. People, who oppose increase in minimum wages, say that free lunch does not exist and many people lose their jobs when governments increase minimum wages. They say that some are beneficiary of increase in minimum wages but a larger number of people suffer its negative consequences. Opponents of increase in minimum wages say that it has not yet proved that increase in minimum wages play any significant role in alleviating poverty.
Neumark & Wascher (2007) in their study analyzed the different minimum wage structure in different states. According to the authors, the wage directly impacts the availability of job in the market and any increase in minimum wage in one state positively impacts the availability of job in other states where the wage is low. The finding of research implied two aspects: increase in minimum wage will decrease the number of jobs available in the market, and second all states should have uniform wage structure in order to avoid employment inequality (Neumark and Wascher). Swidinsky (1980) in his article mentioned that any increase in minimum wage will significantly impact the labor working at the bottom of hierarchy as it will reduce the demand of labor. The author mentioned that increase in minimum wage will also increase the unemployment (Swidinsky).
Increasing minimum wages in Canada is one of debated issues. Workers have their arguments and corporations have their own arguments. Policymakers should consider this issue in the most serious and prudent manner. The issue is important because workers are part of our society and they should be treated in a fair manner. They have every right to live a dignified life like other people of the society. Employers should understand that workers are the main force and they
Having observed an overview and succinct analysis of the abovementioned subject, this paper concludes that increase in the minimum wage is an issue that needs to be considered in serious perspectives. All related parties including workers, employers and the governments should workout in order to find logical and admissible findings because this issue affects the economy of the country. Economic policies, being an unpredictable and dynamic sphere, are affected by cause and effect relationship. The increment in wage acting as an attractive factor to pull the attention of a lot of workers would lead to a boost in the national economy provided that the ill effects are addressed sensibly. There are various positive and negative aspects of increasing the minimum wage and the issue should be looked in Toto to present a solution that is acceptable to everybody without affecting the interests of any of related parties.
Boeri, Tito. "Setting the minimum wage ." Labour Economics, 19(3) (2012): 281–290. Print.
Lemieux, Thomas. "The changing nature of wage inequality." Journal of Population Economics, 21(1) (2007): 21-48. Print.
McParland, Kelly. Change that’s ready? Thomas Mulcair’s first pledge sounds more like ‘same old NDP’: National Post. 15 September 2014. Electronic. 21 November 2014.
Minimum Wage: Ontario Ministry of Labour. 2011. Electronic. 21 November 2014.
Neumark, D., and Wascher, W. "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research." Foundations and Trends in Microeconomics, 3(1/2) (2007): 1-182. Print.
Swidinsky, R. "Minimum Wages and Teenage Unemployment." The Canadian Journal of Economics, 13(1) (1980): 158. Print.
Tom Mulcair says he will propose $15 federal minimum wage: CBC News. 13 September 2014. Electronic. 21 November 2014.
Voiceonline. Canada due for minimum wage debate 0. 6 December 2013. Electronic. 21 November 2014.