jillumbach Media, Research

Charles Lammam & Hugh MacIntyre: Help young workers, don’t raise the minimum wage

Charles Lammam and Hugh MacIntyre, National Post | 13/08/26 | Last Updated:13/08/23 1:30 PM ET

Youth unemployment is still unacceptably high,” noted the Ontario government as it identified priorities in its 2013 budget. Oddly, however, the government is now contemplating a policy that would make it harder for young Ontarians to find jobs. With its newly minted advisory panel, the government is considering ways to automatically increase the minimum wage by tying its future value to changes in inflation or perhaps economic growth.

The panel’s lofty goal is to “come up with a system that will ensure both job creation and income security for all Ontarians.” Achieving it, however, is wishful thinking. Scores of economic studies have found that minimum wage increases result in fewer job opportunities, particularly for the young and low-skilled.

Before the panel gives its recommendations, it should ponder a new study published earlier this month by the National Bureau of Economic Research. Instead of the traditional approach of looking at employment levels, the authors looked at how minimum wage increases impact net job creation (jobs created minus jobs destroyed). After examining data in U.S. states from 1977 to 2011, they found that a 10% increase in the minimum wage led to about a one-quarter reduction in the rate of net job growth. Put another way: increasing the minimum wage reduced the rate of jobs being created, resulting in fewer employment opportunities than would have otherwise occurred.

Of course, one study alone is not convincing evidence of the destructive effect of minimum wage hikes. So consider a comprehensive review of the academic literature conducted in 2006 on minimum wages and employment. Led by Professor David Neumark, an expert in the area, the review looked at more than 100 studies covering 20 countries and found an overwhelming majority of studies reached the conclusion that minimum wage hikes negatively impact employment.

In Canada, more than a dozen studies have examined the impact of provincial minimum wage increases. Based on those findings, a 10% minimum wage hike decreases employment for young workers (ages 15-24) by an average of 3-6%. For young workers most affected — those earning between the current minimum wage and the proposed higher wage — the impact is more acute, with job losses of up to 20%.

To understand why increasing the minimum wage has such negative effects, it is important to recognize how compensation is determined in competitive markets. Compensation is based on the amount employees produce — their labour productivity. For example, if a fast-food employee can produce a maximum $8 worth of output each hour, then her employer would be willing to pay up to $8 per hour in total compensation. In other words, the employer aims to match per unit labour costs with the value of what their employees produce.

If the government imposes a minimum wage rate that results in compensation exceeding an employee’s maximum ability to produce, employers adjust their affairs accordingly. Employers not only respond by decreasing the number of jobs but also byreducing the hours employees work, cutting non-wage benefits like on-the-job training,giving priority to the most productive employees, and/or finding ways to operate with fewer workers and more automation.

There is also a growing body of evidence showing that minimum wage increases actually do little to help households in need.

A 2012 study by prominent Canadian minimum wage experts analyzed provincial data from 1997 to 2007 and found that raising the minimum wage had no statistically discernible impact on measures of relative poverty (including Statistics Canada’s Low Income Cut-Off). One important reason is the bulk of minimum wage workers do not actually belong to low-income households. In a 2009 study, researchers used Statistics Canada data to profile minimum wage earners in Ontario. They found that “over 80% of low-wage earners are not members of poor households” (they define poverty as earning income that is half the median wage). The researchers also found that “over 75% of poor households do not have a member who is a low wage earner.”

If the government is serious about tackling Ontario’s youth unemployment and fostering job creation, then it should steer clear of future minimum wage increases regardless of what formula the advisory panel recommends. The reality is that increasing the minimum wage will actually reduce job opportunities while doing nothing to alleviate poverty.

National Post

Charles Lammam and Hugh MacIntyre are analysts at the Fraser Institute.

jillumbach General Information, Resources

Stepping Up – A Strategic Framework to Help Ontario’s Youth Succeed

Stepping Up is a first-of-its-kind framework developed by the Government of Ontario to help guide, focus and maximize our collaborative actions to support young people.

Stepping Up defines what we believe matters most to our young people. It describes what we are already doing to support them and what we can accomplish by working better together.

Stepping Up is an evidence based framework, developed through existing research on youth development and in consultation across government and with young people and their allies. It builds on past consultations and recommendations from a range of reports and initiatives.

Stepping Up articulates the government’s sustained commitment to supporting the well-being of Ontario’s youth. Stepping Up’s vision, guiding principles and priority outcomes will influence how the government develops policies and designs programs relating to youth.

Stepping Up is also a call to action for those that look out for the well-being of young people in Ontario. It has been developed so that young people themselves, families, governments, foundations, philanthropic organizations, public agencies, charities, community organizations and private businesses can identify ways to help youth succeed.

Themes & Priority Outcomes

Health & Wellness
1 Ontario youth are physically healthy.
2 Ontario youth feel mentally well.
3 Ontario youth make choices that support healthy and safe development.

Strong, Supportive Friends & Families
4 Ontario youth have families and guardians equipped to help them thrive.
5 Ontario youth have at least one consistent, caring adult in their lives.
6 Ontario youth form and maintain healthy, close relationships.

Education, Training & Apprenticeships
7 Ontario youth achieve academic success.
8 Ontario youth have educational experiences that respond to their needs and prepare them to lead.
9 Ontario youth access diverse training and apprenticeship opportunities.

Employment & Entrepreneurship
10 Ontario youth have opportunities for meaningful employment experiences.
11 Ontario youth have the skills and resources needed to develop a successful career or business.
12 Ontario youth are safe and supported at work.

Diversity, Social Inclusion & Safety
13 Ontario youth experience social inclusion and value diversity.
14 Ontario youth feel safe at home, at school, online and in their communities.
15 Ontario youth respect, and are respected by, the law and justice system.

Civic Engagement & Youth Leadership
16 Ontario youth play a role in informing the decisions that affect them.
17 Ontario youth are engaged in their communities.
18 Ontario youth leverage their assets to address social issues.

Coordinated & Youth Friendly Communities
19 Ontario youth have access to safe spaces that provide quality opportunities for play and recreation.
20 Ontario youth know about and easily navigate resources in their communities.

To see the full framework: Stepping Up_a strategic framework to help Ontario’s Youth Succeed

For a two page summary handout see: steppingup-summary

jillumbach Media

Minimum wage needs to be re-engineered

By:  Business, Published on Tue Aug 06 2013

Properly understood, the minimum wage is a stimulus benefiting the entire economy.

The minimum wage puts a floor under poverty among the working poor. (It would surprise many people to learn that most poor people work.)

It enables entry-level employees, notably youth working their way through college and university and immigrants intent on self-sufficiency, to get a solid start as dynamic contributors to a more prosperous Canada.

And in times of anaemic GDP growth like these, increases in the minimum wage boost economic activity to the advantage of all.

Anti-poverty activists chastise Queen’s Park over the province’s three-year freeze of the minimum wage, at $10.25 an hour. They should keep in mind that it was the Liberals who hiked the minimum wage by 50 per cent since taking power, ending a nine-year freeze at $6.85. If they imagine that a Premier Tim Hudak will show similar concern for the working poor, I’m the King of Siam.

These activists also despair that it has taken two years for the Liberals to honour their promise to set up an advisory panel on how best to calculate the minimum wage. Here they are on more defensible ground. Still, it’s understandable that Queen’s Park would be skittish about a panel that will likely call for a hike in the minimum-wage, when the powerful employer groups opposed to one will so easily cite a weak economy as reason not to do so. (A canard, as I’ve noted above: this form of stimulus is needed now more than ever.)

Plus, the advisory panel Queen’s Park named July 17 shows promising signs of reforming the minimum wage as one of government’s most effective tools for achieving at least a semblance of economic justice, along with the social safety net, job-training programs, and income supplements.

To this point in the history of the minimum wage, increases have been an ad hoc affair. This has given neither workers nor employers adequate explanation for their timing or desired effect, and obviously provided no one a chance to plan for and adjust to them.

Anil Verma is the University of Toronto business-school professor and specialist in industrial relations and human resources named to head the six-member advisory panel of business, labour and youth representatives. Verma wants to go still further in reforms.

Typically, inflation alone is used in calculating minimum-wage increases.

By contrast, Verma has an admirably holistic regard for the minimum-wage. It should be a tool for combating poverty, he believes, one that’s better integrated with other poverty-fighting practices. It should also be re-engineered to boost the overall economy and the productive capacity of the workforce.

Helping low-paid workers keep up with skyrocketing costs in housing, tuition and energy is fine and good. “But that ignores two other vital factors,” Verma told The Star when his appointment was announced. “One is the overall growth in the economy and the second is productivity on the job.”

Only a simpleton would fail to grasp that an under-educated workforce will not deliver the productivity gains required to enhance Canada’s global competitiveness. And that the formidable expense of undergraduate and mid-career adult education is holding us back in creating the world’s smartest workforce.

It’s sobering to consider that just over 1 million Canadian workers are employed at minimum wage jobs, 534,000 of them in Ontario. That’s because low-wage work in the service sector has surged, while traditional, higher-paying manufacturing jobs have been fading away. Note the stupendous growth of minimum-wage employers like Wal-Mart and Tim Hortons, Canada’s biggest retailer and fast-food operator, respectively.

For the nearly one in 10 Canadians paid the minimum wage – more than double the portion of only a decade ago — pre-tax annual income is $20,500, woefully inadequate to raise a family. By comparison, the average industrial wage is $45,588 per year. And the average pay for the 100 best-paid corporate CEOs is $7.7 million.

To judge from the Wall Street meltdown and the Lac-Mégantic tragedy, CEOs have not become noticeably more competent as their pay has soared. Yet it’s among their ranks that one hears loud objections to a few more shekels for the working class.

In a Canadian economy where consumer spending drives 54 per cent of GDP growth, it just makes sense to put more money in the pockets of those who quickly spend on necessities the additional pay they earn. Corporate Canada, by contrast, has been withholding from the economy its tax breaks, subsidies and burgeoning profits since the onset of the Great Recession.

I can’t say it better than the economist Armine Yalnizyn: “Employers don’t create jobs; consumers do.” As long as so many of the employees at my local Tims are forced to hold down two jobs to get by, I’ll know we’re not nearly the caring society we pride ourselves in being.

jillumbach Media, Upcoming Events

Ontario to Consult on Development of New Poverty Strategy

NEWS RELEASE

Ontario Government Renewing Its Commitment to Reduce Poverty

Province to Consult with Ontarians on Development of New Strategy

July 26, 2013 12:30 p.m.Ministry of Children and Youth Services

Ontario is renewing its commitment to reduce poverty with the launch of province-wide consultations to hear how government and communities can continue to work together to break the cycle of poverty.

Feedback from the consultations will contribute to the development of a new five-year Poverty Reduction Strategy for Ontario.

Breaking the Cycle: Ontario’s Poverty Reduction Strategy was launched in 2008, signalling a bold, new vision for a fairer society. Despite a difficult economic climate, more than 40,000 children and their families were lifted out of poverty between 2008 and 2010.

Government-led community consultations will begin in early August and continue into October. Individuals and organizations will also have the opportunity to conduct consultations in their communities and provide feedback.

Reducing poverty and creating more opportunities for families is part of the Ontario government’s plan to build a fairer, more prosperous society and help people in their everyday lives.

Quick Facts

  • More information and online consultations will be available atwww.ontario.ca/breakingthecycle on August 6, 2013.
  • Over 950,000 children in 510,000 families are benefiting from the Ontario Child Benefit. The benefit increased this July to a maximum annual payment of $1,210 for each child, and will increase to $1,310 in July 2014.
  • Over 690,000 children receive healthy food in Ontario schools through the Student Nutrition Program so they are better prepared to learn.
  • A government-appointed advisory panel is consulting with Ontarians to examine the province’s current minimum wage, which has increased 50 percent since 2003, from $6.85 to $10.25 an hour.
  • A single parent with a young child, working full-time at minimum wage and accessing all available benefits was living above the poverty line in 2012. The same single parent would have been living below the poverty line in 2003.
  • The Poverty Reduction Act, 2009 requires Ontario to develop a new poverty reduction strategy at least every five years.

Quotes

“It is important that we build on the momentum of the first Poverty Reduction Strategy to create a more prosperous and fair Ontario. That is why we’re asking for input from Ontarians as we work towards a new strategy. Together, we can find practical solutions to help families break the cycle of poverty.”

Teresa Piruzza, Minister of Children and Youth Services

“Poverty erects barriers to health and happiness. A renewed poverty reduction strategy will help open the way to more opportunities for all Ontarians.”

Ted McMeekin, Minister of Community and Social Services