Insights at UBC Sauder

B.C. election Q&A - How the platforms stack up on minimum wage

Posted 2017-05-05

In the final of a four-part series, we speak to UBC Sauder Professor Emeritus Mark Thompson about the promises the B.C. Liberals, NDP and Green Party have made to voters when it comes to the minimum wage.

The B.C. Liberals want to focus on helping people upgrade their skills to secure higher-paying jobs, the NDP are proposing to increase the minimum wage to $15/hour, and the Green Party is advocating a shift towards a basic income for all British Columbians. What platform is more realistic?

At $10.85 per hour, British Columbia’s minimum wage is one of the lowest in the country, despite the high cost of living in cities like Vancouver.

Although the Liberals make a valid point about wanting to prepare people for skilled employment, so far there’s little evidence that keeping wages low actually increases the supply of skilled workers. If anything, evidence points to the need for higher minimum wages, and many jurisdictions across the globe are moving this way. For example, Seattle raised its minimum wage to $15 USD/hour, and Alberta will implement a $15 minimum wage by October 1, 2018.

The Green Party’s proposal for a guaranteed basic income isn’t new; it was tried in the 1970s, and Ontario recently announced a trial in Hamilton, Thunder Bay and Lindsay. With such a program, the minimum wage is irrelevant. But, experience in the 1970s taught us that it’s a complicated policy to implement, especially given the array of social benefit programs that currently exist.

Ultimately, B.C. is a wealthy province and I believe we can do better to support our workers. Over the past 16 years of B.C. Liberal rule, wages have been stagnant, the cost of living has increased, economic performance has been mediocre and there are a lot of people in need. Although a $15 minimum wage isn’t the best way to help the poor, we know it will put them in a better position than they are today. The province can afford to increase the minimum wage, and I believe we should do it.

What are the arguments for and against a higher minimum wage?

Opponents to higher wages always argue that jobs will be lost, but the overwhelming evidence is that job loss is negligible at most. In fact, increasing low wages stimulates the economy, because these workers spend their income in the communities where they live.

Industries like hospitality and agriculture have also argued very hard that they will be forced to pass on higher labour costs to consumers. Unfortunately, these lobbyists have been successful despite some holes in their arguments. Take, for example, restaurants faced with higher labour costs – they’ve accommodated this change by altering their menus and reducing the number of labour-intensive dishes to be prepared. Starbucks is a great example of a company that has adapted to changing labour demands by allowing customers to order through an online app, thereby enabling them to do some of the work themselves. Employers have many ways to respond to legislated wage increases before raising prices.

Proponents of a higher wage often say that by paying people more, companies will get higher-calibre workers. Even the most conservative economists would agree, but organizations need to ask themselves: does the improvement in the quality of workers offset these higher costs?

Looking at these arguments, I don’t believe an increase will result in a serious disruption to B.C.’s economy. Employment fluctuates for a variety of reasons, so it’s very difficult to tease out the impact of a higher minimum wage from other factors. Although the economic impact will not be great, the welfare of our lowest-paid workers will be improved.