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Issue Profile: The Minimum Wage (with free bonus overtime coverage)

The minimum wage and overtime pay are not as complicated as say, equalization payments.  The concepts are simple.  Anyone who works gets paid a minimum amount of money per hour.  And if you work a certain number of hours in a day or a week, you get paid extra.  But while the concepts are simple, the debate surrounding them is murkier and never seems to go away.  Every few years we get politicians railing against or advocating for a minimum wage increase.  So let’s explain the issue and try to understand both sides.  It’s time for the TTC explanation of the minimum wage… now new and improved with bonus overtime condescension!

Explaining the issue:

The effects of minimum wage hikes can’t even be agreed upon by economists, much less politicians (Harry Truman famously looked for a one handed economist).  Even the ones most in favour of hikes will concede that there are trade offs to raising it.  And even the ones most opposed will admit that there is a human cost to keeping it low.  There is certainly a line where it hurts businesses to have to pay employees too much.  And even before getting to that point, there are indirect ramifications of things like inflation.

All of these sorts of unintended consequences are raising (or maintaining) the minimum wage are incredibly complicated and there is genuinely no consensus among experts, despite what your aunt Carol keeps telling you.  You know what politicians and the electorate don’t like?  Complex, multifaceted issues.  It’s much easier when it’s black and white.  You’re either for something or against it in politics – and that’s a major reason why our politics aren’t better.  I try to keep things pretty basic on this blog, but if you want to investigate things in more detail, this is a good place to start.

Why is it an issue:

Generally speaking, conservatives are more cautious in raising the minimum wage.  Before the NDP came to power in 2015, Alberta historically had one of the lowest minimum wages in Canada.  When the NDP came to power they followed through on a campaign promise to raise it to the highest in the country; $15 per hour.  They did it in stages, but the end goal was all that anyone focused on.  The timing of the wage increase was not exactly ideal.  I don’t know if you heard, but Alberta is kind of having a tough go of things in the economic and jobs departments.  Many people argued that raising the minimum wage during a recession hurt businesses and made unemployment worse.  It’s hard to argue that it helped the economy as a whole, but the people who got raises certainly weren’t complaining.

That brings us to the current campaign.  With Alberta still lagging in the jobs arena, Jason Kenney and the UCP decided that the rules were hurting businesses too much.  But he couldn’t just come right and say he’d lower it, the people who were getting it wouldn’t be very happy.  Instead, he proposed two things.  First, he’d introduce a tiered system.  For anyone over 18, the $15 minimum would apply.  But for anyone 17 and younger, a different minimum of $13 would apply.  He also proposed that businesses could “pay” overtime by over time in lieu rather than pay.  This time in lieu would only be at one to one rather than time and a half.

TTC’s take:

Unlike some other issues, I don’t have a strong view of all of this.  It feels strange to always be discussing issues where Mr. Kenney is running opposed to the rest of the field, but that is largely how this election has played out so far.  No other party is suggesting any changes to the minimum wage or overtime, so once again we are forced to make this a binary choice.

Let’s start here:  people deserve to be fairly paid for the work they do.  What’s the point of having a minimum wage if it isn’t high enough for a person to afford the basic necessities of life?  Anyone reading this and thinking, “Anybody should be able to pay for basic necessities on $31,000 per year” has clearly never tried it.  Edmonton and especially Calgary have some of the highest rent and real estate in Canada.  So, it makes sense to raise everyone’s minimum wage.

On the other hand, there are serious repercussions.  It legitimately hurts small businesses.  I don’t think most voters care how much it hurts Walmart or McDonalds but it hurts mom and pop shops the most.  I have a lot of experience running a small business and I can tell you that the more the minimum wage goes up, the harder it is to stay in business.  The other thing that happens is that as we raise the floor, we add more people to it.  Sure, we raise some people up, but they are joined by many others as the new floor.  Where does that end?

As I mentioned previously, experts are torn on the effects of raising the minimum wage.  Some say it hurts businesses immensely, and others say it is a pin prick.  How much should we care about how much it hurts businesses depends on the kind of business.  It would seem to make sense to raise the minimum wage and use some of the proceeds to throw small businesses a bone in other ways.  The issue with doing that is many small businesses make little or no money and so any financial breaks would have to be programs that help with costs directly, and those cost much more to run.

My first reaction to the idea that people under 18 should make less for their work is to be offended.  But there is more to this than that.  The unemployment rate in Alberta is driven largely by youth (mostly men).  Young people are much more likely to be hurt by recessions.  Lowering their minimum wage does provide some minor incentive for businesses to hire young people.  That could be a good thing.  But will it come at the expense of people with families to feed?  I’m not saying that people without families should be treated differently, just that the economic ramifications could worse.

As for overtime, I don’t mind saying that there is no reasonable argument.  People deserve to be able to go home to their families and/or to relax.  The realities of the world dictate that will not always be possible, but companies should have financial incentives to allow people to.  And people should be better compensated when they can’t.  Giving someone equal time off in lieu doesn’t make up for things.  Under the current system they can be given time off at time and half, so why mess with it?

The debate is tonight, and I imagine this topic will come up repeatedly and passionately.  Now you can at least understand what people will be yelling at each other about.  Remember, there’s a right way to watch debates, and I hope you will watch with an open mind and critical thinking.

 

 

I encourage you to comment with your thoughts.  I love to debate and clarify.  Before you engage though, please take a moment to review the FAQ and About TTC pages.

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