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The Increasing Minimum Wage in Canada and America

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In Ontario, the government increased the minimum wage from $11.6 to $14 per hour which led to some controversial discussions among people. Meanwhile, some similar policies are published by many provinces and states in Canada and America as well. According to the analysis of the results of increasing the minimum wage and comparison between the provinces and states of Canada and America, the hike of minimum wage seems to bring benefits to the workers, however, those actions are actually also resulting in some negative effects and serious consequences for the low skilled workers, country economy, small business owners, and the employment trend.

At the beginning, the original intention of government is helping the low-income workers to improve their life qualities, especially the living standard and finally raise the country’s economy. Meanwhile, the majority of low-income workers are young people who are particularly part-time workers who are expected to keep them above the poverty line by this increasing minimum wage policy. What’s more, the employees can get inspiration from the higher salaries that encourage them put more efforts and loyalty to their companies. Furthermore, increasing minimum wage can make economic growth because the expend of people would be raised by the increasing wage, which can promote the consumption to achieve the economic growth (Maverick, 2016). In spite of their positive intention for the lower income group, the negative effects of increasing the minimum wage are apparent. It is necessary to define what is poverty and low-income people who earn the minimum wage. However, the survey that made by Statistics Canada express only 9.2% of minimum wage earners lived in a low-income family in Ontario in 2015. This means more than 90% of minimum wage earners get the standard live quality which are not targeted by the increasing wage policy. Furthermore, the teenagers and youths whose age are around 15 to 24 are taking up large percentage in the minimum wage earners. And they nearly live with parents, in other words, they are also not the only earners in their families. As a result, not the whole group of minimum wage earners are the targets of this policy which make less expectative aids for the low-income workers. In this way, they come up with a new policy, called work-based subsidy, providing the pointed strategies to poor people to solve poverty. For the low-income people, it is better that government gives them money straightly (Lammam & Maclntyre, 2018).

Additionally, raising the minimum would create the jobs that has proved by the recent data, the unemployment rate fell to 5.4% which reached the lowest point these years in Ontario. In this way, Ontario government adds huge amount of jobs to make up the job shortage of wholesale and retail where are mostly the minimum wage earners work. Indeed, increasing minimum wage helps to solve partial job loss problems so far (Tencer, 2018). For small business, raising the minimum wage means the owners need to take own responsibility to consider about the long-term and permanent operation for the companies by saving costs from wage for employees. In some views, it hurts the small business owners and improve the rate of job loss for youths and unexperienced workers. The owners need to raise the cost of products to consumers in order to offset higher wage for workers and also, they could reduce the number of workers to control the labor costs. So, they give priority to the practical workers who have abundant experience. And hire the youths and unexperienced workforce. Meanwhile, the overall employment rate will fall easily in order to save the budget. Also, they would reduce the work hours of staffs to decrease their salaries which result in the less productivity. Apart from reducing costs of employment, decreasing the times of non-profits training and high welfare for employees are also the solutions that are considered by many small business owners. However, it cannot be ignored that the employees are afforded the most business loss by increasing the minimum wage. It means that the improved salaries for employees are offset a lot by the reduction of bonus by companies.

Moreover, the increasing minimum wage is affecting the economy of Canada and America as well. In some ways, increasing minimum wage causes the inflation pressure which is connected with wage growth closely. Although the high minimum wage can contribute to the economy by the higher consumption of workers, the hike of unemployment rate cannot be neglected. But the inflation is not easily to be increased straightly by only boosting the minimum wage, and which should be solved is the pressure on the inflation. In theory, increasing the minimum wage could cause the improving price of the products and service by the business owners. Also, some small businesses face the danger of closing down under the stress of potential staff costs. In fact, salary is not the sole factor that consumers costs. In practice, the potential staff costs can be offset by improved productivity and reduced workforce. This may not impact the income of the company negatively, even they make more money, however, the unemployment rate changes apparently. For instance, the minimum wage in California have been raised form $6.75 in 2006 to $10.50 in 2017 and predicted to reach $15 in 2022. According to the recent impacts of raising the minimum wage, the experts pay attention on the effects for the restaurant industries. From 2007 to 2008, the minimum wage increased $0.5, and restaurant service industries earning raised 10% but the employment rate decreased by 12%. The earning of restaurant industries raised another 20% and the employment rate reduces 10% again (Ingraham, 2018). Comparing with the Canada, the bosses of Tim Hortons reduced the breaks and welfare for the workers who draw the minimum wages. It is worth to mention that those workers will be required to pay 50% or 75% of the cost of benefits if they worked between 6 months to 5 years or over 5 years. That made a discontented by the employees. (Saltzman, 2018).

There is an example that analyzes the effects for Alberta by increasing the minimum wage. In 2015, Alberta became the first province that increased the minimum wage to $15 in Canada. It was also be the first province or state to reach this purpose in North America. It is different from the other states in economic and national conditions, such as California or New York. So, Alberta can be a particular case to discuss about the effects and changes by raising the minimum wage. It is important to point that there is a strongly competitive labor market in Alberta, especially the energy and power industry. In a competitive labor market, increasing the minimum wage could result in the employment loss theoretically. The statistics express that about 25,000 jobs were lost when the policy was operating, and similar number of workers who take the minimum wage were influenced to lose their jobs in Alberta. Meanwhile, Alberta has abundant resources that could be affected by the energy price straightly or indirectly, leading to the boom and bust cycle of salaries and employment. The research pointed out that raising the salary can happen after the transferring of labor demanding by higher energy price, which increase the employment opportunities and reduce the potential unemployment rate as well. This is expected to be more beneficial for the Alberta economy development, otherwise, it might aggravate the inequity and poverty. In general, Alberta needs to find the other strategies while the minimum wage hike to adapt to the economic conditions. In other word, the priority of highly increasing the minimum wage is not completely appropriate for the Alberta so far, and already create the slight employment loss in the short term. So, the current and future conditions of economic balance should be considered first. (Marchand, 2017).

Similarly, the increasing minimum wages are heated discussed and pushed by a lot of people in the US. In 1967, Martin Luther King organized the Poor People’s Campaign to urge government solve the poverty problems for the low-income workers. In 2018, the US government decided to increase $0.5-$2 per hour in some states and cities for minimum wage in 2019. Even though a lot of economics disagree the hike of minimum wage and insist on their perspectives for the increasing minimum-wage impacts, it helps the low-income workers improve their lives in practice. In America, the minimum wage even cannot follow the speed of inflation. According to the data by Economics Policy Institute, transfer the 1968 to 2017 dollars, the minimum wage of a full-time worker is $20,600 a year. In fact, a minimum wage worker only earns $15,080 a year in 2017. Since the policy publishes, there are some changes happen recently, Jeff Bezos, the founder of Amazon promises to improve their minimum wage to $15 for its workers in the US. In other words, it is a signal that the policy of minimum-wage increasing begin to change (Rushe, 2018). However, some workers express that Amazon eliminate their bonuses and stock grants after raising the minimum wage. Although the actions of Amazon bring out both approval and disapproval, there are also many American retailers are stressed and starting to change their minimum wages, such as Target, McDonalds, and Costco. The government still look on the following influences by increasing the minimum wage, and may make it adjust the national economic conditions.

In summary, the increasing minimum wage brings benefits and negative consequences to Canada and America. It shows the determination of government to help the low-income workers improve their life qualities, but the harm for economic changes and unemployment cannot be neglected. It might be a debatable issue because different classes of people keep the various opinions about increasing the minimum wage, for example, the low-income workers are expecting government to raise their wages, but many business owners have the opposite ideas for that, especially some small business owners. The most researches and economists suggest that government should play close attention to its trend and effects to both citizens and national economy, since the policy is put in practice. In other words, increasing the minimum wage is not a long-term and permanent solution to solve the poverty problems and eliminate the gap between the rich and the poor. It is necessary that government come up with other ideas and solutions to deal with poverty problems and fit the economic conditions.

References

  1. Dixon, L. (2017). How Does the Minimum Wage Impact the Economy? Retrieved from. https://www.clomedia.com/2017/06/14/minimum-wage-impact-economy/
  2. Doyle, A. (2018). Pros and Cons of Raising the Minimum Wage. Retrieve from. https://www.thebalanc ecareers.com/pros-and-cons-of-raising-the-minimum-wage-2062521
  3. Ingraham, C. (2018). What does a $15 minimum wage do to the economy? Economists are starting to find out. Retrieved from https://www.washingtonpost.com/news/wonk/wp/2018/01/11/what-does-a-15-minimum-wage-do-to-the-economy-economists-are-starting-to-find-out/?noredirect=on&utm_term=.d282cba274cc
  4. Lammam, C.& Maclntyre, H. (2018). Increasing the Minimum Wage in Ontario: A Flawed Anti-Poverty Policy. MA: Fraser Institution.
  5. Marchand, J. (2017). Thinking about Minimum Wage Increases in Alberta: Theoretically, Empirically, and Regionally. MA: C.D. Howe Institute Commentary.
  6. Maverick, J. B. (2016). What Are the Pros and Cons of Raising the Minimum Wage? Retrieved from https://www.investopedia.com/articles/markets-economy/
  7. 090516/what-are-pros-and-cons-raising-minimum-wage.asp
  8. Rushe, D. (2018). Critics fear Amazon’s minimum wage hike will distract from its other issues. Retrieve from https://www.theguardian.com/us-news/2018/oct/06/critics-fear-amazons-minimum-wage-hike-will-distract-from-its-other-issues
  9. Saltzman, A. (2018). Tim Hortons heirs cut paid breaks and worker benefits after. minimum wage hike. Retrieved from https://www.cbc.ca/news/business/tim-horton-s-tims-timmies-doubledouble-minimum-wage-ontario-kathleen-wynne-labour-1.4470215
  10. Tencer, D. (2018). No, Ontario’s Minimum Wage Hike Didn’t Kill Jobs. Here’s The. Proof. Retrieved from https://www.huffingtonpost.ca/2018/08/13/minimum-wage-hike-ontario-job-growth_a_23501349/

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