Torontoist vs. Torontoist: Minimum Wage!
Torontoist has been acquired by Daily Hive Toronto - Your City. Now. Click here to learn more.




Torontoist vs. Torontoist: Minimum Wage!

Every week (or so), two Torontoist staffers square off to debate an issue that’s important to our city. We invite our readers to join the debate in the comments section following the post.
In the last few weeks there’s been a campaign by the provincial NDP and their supporters to increase the minimum wage in Ontario from 8 to 10 dollars an hour, and opinions are deeply divided on what for many is a very emotional issue. Read on as two Torontoist writers add their two cents to the debate.


Every debate about raising the minimum wage winds up being a debate about economics. This debate will be no different, but before we launch into an economic discussion, let’s start with what should be a guiding moral principle in our society:
Any person who has a year-round full-time job should not be living in poverty.
It’s really as simple as that. Everything else is just noise: one economic theory against another, one study against another study, a debate over definitions and semantics. With all that noise, it’s easy to forget our principles.
If a business really can’t make a profit without keeping its own employees in poverty, then I don’t think it’s too bold to suggest that maybe that business shouldn’t exist. Let those business people find something better to do with their time, money, and brains.
Now, onto the economics…
Some claim that increasing the minimum wage will create unemployment. A number of studies suggest otherwise. In 2003, the minimum wage in San Francisco was suddenly raised $2 per hour, from $6.50 to $8.50, a 30% increase. This study found that, despite the sudden raise, there was no discernable effect on unemployment. This study in New Jersey and Pennsylvania also found that minimum wage increases had no effect on unemployment, and even a quick survey of various minimum wage increases plotted against unemployment numbers shows no correlation.
What seems clear though, even from studies that do find small rises unemployment, is that this is a pretty minor risk. When you compare that risk to the benefits of paying people a decent wage, especially at a time when we are experiencing record-low unemployment, it seems like no contest.
Another argument that invariably pops up in these debates is that a minimum wage increase will cause inflation. This shows a fundamental misunderstanding of the causes of inflation. Inflation is caused by a society-wide increase in the supply of money or credit. Raising the minimum wage only redistributes money within society, and therefore is inflation-neutral. The Cato Institute (a libertarian think-tank that is opposed to any minimum wage) does a good job of explaining the fallacy of cost-push inflation in this scenario.
Of the 200,000 Ontarians earning minimum wage more than half are students, but we are not just talking about them. We are talking about the 1.2 million Ontarians who work but earn less than $10/hour. A lot of businesses boast that they pay above minimum wage, but by that they mean fifty or seventy-five cents above minimum wage, not a living wage. Ontario’s most recent Hunger Report tells us that 17% of food bank users in this province are employed. This is a shameful situation and we have a moral duty to correct it. A job should be a way out of poverty, not a guarantee of it. Many of us know struggling families with one or both parents earning less than $10/hour. We don’t need a study to tell us that those families will benefit from every extra dollar they receive.
Just before Christmas Ontario MPPs gave themselves a 25% raise. The $88,771 they were getting just wasn’t fair and they worked around the clock to ensure that the problem was fixed. Ontario’s working poor deserve the same treatment.

The drive to raise the minimum wage to $10 an hour is a cynical ploy by grandstanding politicians to leverage an issue which appeals to everyone’s sense of compassion. After all, anyone who doesn’t support a better quality of life for poor working mothers has got to be some kind of fiend, right? The problem is that a big jump in the minimum wage is the kind of simplistic “solution” that looks good in a headline, but which doesn’t work as advertised.
Adjusting minimum wage to combat poverty is akin to solving a cockroach infestation with a sledgehammer – a dramatic and costly approach that will miss most of its intended targets. The principal problem can be summed up succinctly: most minimum wage earners are not poor, and most poor people do not earn minimum wage.
The connection between hourly wages and family income is tenuous at best. Statistics reveal that 60% of minimum wage earners live with their parents or other family members who are the primary source of household income, and that a full third are students working part-time. Less than 17% of people earning minimum wage are employed full-time and supporting themselves or a family on their pay. Thus, a raise would overwhelmingly accrue to young people working part time and living in households with multiple incomes. It does nothing for the vast majority of the poor, whom the data show do not earn minimum wage, but are poor either because they have no income at all, because they don’t get enough hours at work, or because they have large families to support on a single income. While there’s nothing wrong with a hard-working middle-class teen making a little extra money, it’s an expensive way to assist a very small proportion of the underprivileged.
How expensive? The immediate cost to business would probably be in the 2 – 3 billion dollar a year range. However, there’s also a human cost to those the move is intended to help. Consider that 60 years of studies on minimum wage have found that increases in the minimum wage are at best employment neutral, and that larger increases (to 49% or more of the average wage, as here) raise the unemployment rate. That’s an unsurprising conclusion –if the minimum wage is raised by 25%, small businesses operating on slim margins (who still employ the majority of minimum wage earners) will have to squeeze more productivity out of fewer workers in order to stay competitive.
Considering that a minimum wage increase is one of the more useless tools in the anti-poverty kit, why is it suddenly so popular with politicians? For one thing, the cost would be absorbed by private business rather than government. In addition, the concept sounds good if you don’t know the facts, and supporters can accuse opponents of being heartless and indifferent to the poor. The language of emotion buys a lot of votes.
That kind of thinking simply muddies the waters. The real goal is to raise family income, and minimum wage is a side issue which diverts public attention and resources from that objective. There are all kinds of measures, such as housing subsidies and income supplements for the working poor, which actually target those in need and hence fight poverty far more effectively than a minimum wage increase. Let’s look some of those options rather than pandering to noisy sloganeers who promote quick but ineffective fixes.