Do you know many people earning minimum wage in Canada or Saskatchewan for their livelihood?
There is quite a bit of talk in Canada about minimum wage levels given Ontario has raised their minimum wage to over $14 per hour for 2018 and plan for it to go to $15 per hour in 2019.
Some argue the increases will improve life for those at the lowest end of the work scale and others argue that jobs will be lost and the very people the raises are supposed to help will actual be hurt. Both sides refer to studies to support their case.
I want to point to some statistics as well as lay out some common sense considerations on the subject.
- Actual Employees Earning Minimum Wage
First off, how many employed people in Canada and Saskatchewan actually earn minimum wage? I have asked this question to a number of people – in business and in employment positions – and I received answers mostly in the range of 25% to 35%. I was in this range of personal belief as well. These answers give the perception that quite a few people earn minimum wage. In fact, these responses lead us to believe that many people in our society are really affected by minimum wage and it should be a hot topic that needs to be addressed and indeed rectified.
Let’s look at the real facts and not the perceptions. The following information is from a Canadian Labour Congress article using information from the “Labour Force Survey microdata 2015, Government of Canada Minimum wage database”
There are about 8% of Canadian employees earning minimum wage and less than 5% of Saskatchewan employees earning minimum wage. In addition, of the people earning minimum wage, 60% are between 18 and 24 and live at home. Therefore, the people actually earning minimum wage is significantly less than the people I talk to perceive and I expect the numbers are less than most people believe.
It appears to me the actual numbers suggest that over 95% of Saskatchewan employees and 92%of Canadian employees earn more than minimum wage and employers are already reacting to the supply and demand in the market place and not the level of minimum wage set by legislation. For the vast majority of employees, minimum wage is irrelevant.
The above study also determined that about 25% of Canadian employees earn less than $15 per hour and for Saskatchewan the amount is 23%. In effect, 75% of Canadian employees earn over $15 per hour. Not bad at all in my way of thinking. Considering that many jobs should have an entry-level wage, I think the marketplace is working just fine in establishing wage levels without the need for a legislated minimum wage.
- Employees Already Earning Above a New Minimum Wage Threshold
Let’s consider an employee who currently earns $16 per hour and all of a sudden their colleague or someone else now gets a minimum wage increase from $11 to $15. How can the $16 person not feel that they deserve an increase as well given there were logical differences for the original pay differential between themselves and the minimum wage person? I expect the $16 person has more education or experience or skills than the other person earning minimum wage. The result of a minimum wage increase is simply not fair and it skews the labour supply and demand pay scale.
If the employer is expected or must then give the $16 person a wage increase, a cycle is started that will effectively raise prices for goods and services and will cause inflation.
There are reasons people seek greater education or stay with a job to gain experience. They want to earn more money or create more skills to move onto better paying work. Employers do pay more for real education and for job experience and the fact there is such a low percentage of minimum wage earners proves this point.
Take an entry-level job at a fast food restaurant. It does not take long to get proficient at the job; however, an employee can learn skills to move onto higher end restaurants and earn more or apply the skills learned to their educational endeavours and future employment. These entry skills include being on time, taking and following instruction, working with other employees and work appearance and safety. Is this entry-level job their career? Probably not. If it is, perhaps this is the highest level of job they can aspire to and that’s alright as well. The fact is some jobs only pay so much and the labour supply and demand marketplace should decide this, not a legislated minimum wage.
- Employer Options to Minimum Wage Increases
It seems to me that of the low percentage of minimum wage jobs in Canada, that fast food restaurants and retail stores probably have the most employees earning minimum wage at the entry levels. So how do the employers react to a significant legislated increase to minimum wage from say $11 to $15?
They can raise prices to cover increased wage costs, reduce benefits not covered by minimum wage, reduce their bottom line net income or automate to remove the minimum wage position.
If prices are raised, will the marketplace accept the increase or will business sales suffer and then employees will be reduced and the business net income will fall? Price increases can also directly affect the minimum wage earners as they are consumers of the products sold at fast food restaurants and low-cost retailers.
Reducing employee benefits is a real possibility; however, many employers will not want to do this if a better option exists. Perhaps a short-term solution.
A reduction in bottom line net income. I don’t believe the business owner will jump for this option if other options exist.
I think business will default to automation if it is possible in their industry. Think about it – there is a labour cost threshold whereby automation makes sense to replace an actual worker. We are seeing automation with self scanners in grocery stores and large retail stores. There are even some fast food restaurants that have started to introduce ordering on a computer board as opposed to a person taking the order. Given these innovations are already taking place, it is not a leap to see the technology grown and expanded. The result – less minimum wage jobs and more automated self scanners and self ordering.
Who really suffers? Jobs will be lost for the very people who need the jobs the most for life and for entry to get to the next level.
Government intervention for the perceived betterment of society does not always return the intended results. Perhaps it is better to let the marketplace work and quit the onerous interference and unnecessary rules and regulations.
My second cup is now empty………………………………
