Rethinking Minimum Wage Policy 

March 1st, 2016 | C. Wang 

Conservatives need to re-think minimum wage laws in the 21st century. I suggest conservatives of all stripes should capitulate on the minimum wage issue and consider the benefits that a $15-an-hour national minimum wage rate would bring.

#1. It will unleash spending power

According to some reports, corporate Canada is hoarding a lot of "dead money" and Canada’s economy is stagnant as a result. The well intentioned corporate tax cuts applied by Chretien, Martin and especially Harper, haven’t unleashed the Ayn Rand-style ambition and achievement that many conservatives held in their dreams. In her book Why Mexicans Don't Drink Molson, Andrea Mandel-Campbell assesses the state of corporate Canada and makes a lot of salient points in regards to problems with capitalism in Canada.

By increasing the minimum wage, we’ll be shifting part of the nest egg of corporate Canada into the pockets of the people who work for them. Using the old Henry Ford $5 day example of turning your workers into customers is what is needed in 21st century Canada. Three decades of stagnant wages and debt-fuelled prosperity has not created the type of situation we’re going to need as a society as we move into the greying 2020’s, 2030’s and 2040’s.

#2. It will increase inflation

Increasing inflation is usually cited as a bad thing in regards to minimum wage, but in a stagnant deflationary 21st century a little more inflation would be a welcome incentive to spend and invest. Diminishing the purchasing power of a dollar saved is what we need to mitigate the macroeconomic downside of the retirement crowd hoarding savings of their own. Getting inflation up to 3 or 4% would be an economic incentive that would get things moving again.

#3. It will help innovation and productivity

Seems like every few months there’s an article talking about Canada's lack of productivity or innovation. Nebulous recommendations are made and nothing really changes. We lag behind the United States and never catch up. This is a pattern that has continued for generations.

By raising the minimum wage, we will incentivize corporate Canada to innovate. If businesses have to pay more for labour automatically, then they won’t be so hesitant to invest in becoming more competitive and innovative. They are already loathe to add jobs if they can avoid it, so by increasing the cost of a job this will function as a kick-start towards increased productivity.

We see examples of this in cases like McDonald's introducing the self-serve kiosk. Rising labour costs pushed this innovation forward and will speed up delivery of food to customers. Many of the lowest end jobs will be extinguished as a result, but this is typically the case for any technological progress. (Does anyone really want to be an elevator operator anyway? Did they ever?)

What we gain in reduced employment is an increase in economic growth. It may seem counter-intuitive, but progress always comes before employment. It’s the creative destruction of developing forward looking economies.

(Technology and innovation may soon come with new problems related to employment. The guaranteed annual income is on the horizon and many advocates aren’t surprised. Conservatives need to stay ahead the curve on this, but that’s for another article...)

#4. What about jobs?!

The general consensus is that higher minimum wages results in lower job creation. Let’s assume this is true. Who would it affect?

High school kids: High school kids won’t get those burger flipping jobs as easily, but in this day and age, high school kids don’t seem as prevalent in the workforce anyway. Too busy with their I-Phones to flip burgers perhaps? It’s not the 90’s anymore. Millennials are either hyper focused on scholastics or they prefer to just chill. This is a gross generalization, but you know I’m right.

University students making money on the side: 60% of minimum wage earners live at home with their families. They won’t starve if they can’t easily find a minimum wage part-time job. They’ll just have slightly higher student loans or less beer money for the weekend.

Workers who are only employable at a lower than $15-an-hour minimum wage:  

Are there many people out there earning $12-an-hour who would be fired immediately if the new base pay was bumped to $15-an-hour? I doubt it, however...

Minimum wage was in some part originally designed to lock out the lowest end people from working and consequently breeding. The idea was that setting a minimum standard would mean anyone below that standard is left for poverty and despair. But that was before the creation of the modern welfare state.

The modern welfare state has provided a level of security and comfort that was unimaginable 100 years ago. This has improved standards of living and quality of life for everyone. The downside, however, is that the system is also experiencing the law of diminishing returns. Real poverty in Canada was solved a long time ago, but the poverty that remains is extremely hard to address.

In other words...there’s two kinds of poor people in Canada these days. Poor people that are at the bottom of society’s barrel and need a hand up and poor people that are beneath society’s barrel and will be poor no matter how many hands are ever extended. We may as well recognize this, admit it and help those who can be helped with a wage boost, and simply manage those who are unhelpable with a stronger safety net. A $15-an-hour minimum wage would help the former and create a stronger economy to help pay for the latter.

#5. What about businesses?

The argument we tend to hear is that businesses will be destroyed if minimum wage increases. Here’s a few points.

1). It’s a level playing field so all businesses will be on the same footing.

2). If a business is so marginal that it can’t absorb a 20% increase in the lowest level labour extra 3 bucks an hour...then maybe that business isn’t worth operating.

3). Many businesses will just pass on the costs to the customer, which takes us back to point #2.

4). Small businesses and family businesses will figure out a way around minimum wages anyway. Cash is king!

5). Corporate taxes have been nearly cut in half since the mid-90’s, but real wages drag along without much change. Think of a minimum wage increase as simply mandating some direction for all those untouched corporate profits.

Conclusion: The Conservatives have spent the past ten years fulfilling the destiny of Reform-era conservatism. That’s over now and new approaches and ideas are needed. A national minimum wage has been proposed before on this site and there was no traction. The idea was proposed again by us shortly before the election in October and still had zero traction. Now is the time for Conservatives to search wide and far for reinvention. Reconsidering what a minimum wage can do for the nation is essential in re-branding ahead of 2019.