By Junaid B. Jahangir, MacEwan University
Alberta’s minimum wage expert panel report was recently released three years after it was submitted to the provincial government.
This panel was formed by the United Conservative Party of Alberta to study the impact of the gradual minimum wage increase that was instituted by the previous NDP government — from $10.20 per hour in 2015 to $15 in 2018.
The report arrives just months before Alberta’s provincial election on May 29. While it could be used by politicians to further their election strategy, it’s important to understand the context of the report.
No matter how airtight the report appears, it has been shaped by standard economics. In other words, it has been shaped by absolute faith in free markets, privatization, liberalization, deregulation, austerity measures and the removal of price controls like the minimum wage.
This single panel report on the supposed ills of the minimum wage should be viewed within the vast, diverse spectrum of economic literature, not just standard economics.
Key findings
The report shows a loss of about 25,000 jobs for 15- to 24-year-olds due to the shift to $15-an-hour minimum wage. Among older workers, the effects were found to be statistically insignificant.
Brian Jean, Alberta’s minister of jobs, economy and northern development, said the main lesson from the report is to avoid “large, unexpected changes to minimum wages.”
The report recommends having a lower minimum wage for less experienced workers and those in rural areas, but there’s no sign of this happening anytime soon. Jean said there are no current plans to change Alberta’s existing minimum wage structure.
The panel included at least three business interest representatives but no representation from labour unions. This absence does not reflect neutrality or a level playing field where different interests are balanced.
The report is based on sophisticated statistical methods led by economics academics. Standard economics gives precedence to efficiency and provides a centre stage to utility and profit maximization. Any concerns about equity and sustainability are secondary.
Standard economics ignores dissident and diverse voices that offer a more nuanced view about minimum wage. It’s unsurprising that, when I looked into the economics literature to develop a renewed perspective on teaching minimum wage, I found so much conflict on the impact of minimum wage on employment.
What the literature says
One 2006 working paper that examined literature about the employment effects of global minimum wages supports the argument that minimum wage has a negative impact on employment. It found that a 10 per cent increase in the minimum wage reduces teenage employment between one and three per cent.
On the other hand, another paper that looked at 64 studies in the United States between 1972 and 2007 found there were zero employment effects of minimum wage.
In Canada, a more recent study by economists at the Canadian Centre for Policy Alternatives also found no connection between minimum wage and employment levels, based on minimum wage increases in 10 provinces from 1983 to 2012.
Such conflicting evidence cautions us to view studies based on statistical analysis very carefully. American economist and professor Lawrence Summers once wrote that “formal econometric work has had little impact on the growth of economic knowledge.” He said it “creates an art form for others to admire and emulate but provides us with little new knowledge.”
Support for minimum wage
Conflicting evidence about the effects of minimum wage should not prevent us from taking a stand in support of the working poor. It should be noted that about 53 economists endorsed a $15 minimum wage for Ontario in 2017.
Similarly, more than 600 economics professors in the U.S. signed a letter in 2014 concluding that increases in minimum wage have little to no negative effect on employment even during a weak labour market. This includes seven Nobel Prize winning economists who endorsed raising minimum wages by 40 per cent.
Economists David Lee and Emmanuel Saez argue that minimum wage is “desirable if the government values redistribution toward low-wage workers” and that “the unemployment induced by the minimum wage is efficient.”
This means that unemployment hits workers who are marginally attached to their jobs, not older essential workers. This is what the Alberta report found as well — there was no significant impact on the jobs of older workers who were not using minimum wage jobs as temporary stepping stones.
Centering different perspectives
Given standard economics and business interests, it was to be expected that a whole panel would be created to find faults with the gradual increase to the minimum wage, which rose by $4.80 per hour from 2015 to 2018.
In contrast, the UCP government drastically dropped corporate taxes to eight per cent from 12 per cent from 2019 to 2020. But there has been no panel questioning the efficacy of corporate tax cuts.
Overall, the report is shaped by standard economics and gives precedence to business interests. It ignores labour interests and perspectives that centre equity over efficiency and contest the standard opinion about the minimum wage.
Instead of viewing the minimum wage as detrimental, dissident perspectives view the minimum wage as a tool to alleviate the plight of the working poor.
In the upcoming Alberta election, the public has a choice: go with the standard opinion that supports corporations or side with dissident voices that give voice to the working poor in a world marred by increasing inequality and shaped by free markets run amok.
Junaid B. Jahangir, Associate Professor, MacEwan University
This article is republished from The Conversation under a Creative Commons license. Read the original article.
