With the recent shift in the political party for the government in Alberta, many things are expected to change. The newly elected NDP party of Alberta won a strong mandate and a part of their platform was to raise the minimum wage to $15/hour over a 3 year period.
The city of Los Angeles has taken the lead to increase minimum wages but the circumstances are much different between the two jurisdictions.
Approximately 1.5% of workers (27,500 workers) are paid the minimum wage in Alberta. Approximately 300,000 people in Alberta earn between the minimum wage and $15/hour. In Los Angeles, approximately 1 million people (27% of workers) are paid the minimum wage ($9/hour) out of a population of 3.7 million. Lastly, Alberta indexes its minimum wage while Los Angeles does not.
The Canadian Federation of Independent Business claims that as many as 195,000 jobs could be lost due to the wage increase. Based off academic research, increased minimum wages brings decreased hours for workers, less training, and some increases in retail prices. It is agreed by experts that increasing minimum wages has ‘no discernable impact’ on unemployment. If job losses are found, it generally affects teenagers.
If higher wages don’t affect unemployment, does it do anything? Of course, people who are currently earning $10.20/hour will have more spending power which can drive economic growth. Increased earnings also mean that lower income people do not require assistance from government programs; therefore, it should decrease government expenditure. Lastly, as many people have missed, an increased minimum wage would help smooth out the oil revenue train that Alberta is on. Higher earning equals more taxes the government can collect.
Warren Buffet is not a supporter of higher minimum wages. He would rather see an “earned income tax credit, also known as a “negative income tax,” in which the government subsidizes the wages of workers making under a certain amount”.
How would you like to see the issue of pay inequality to be solved? Personally, I am leaning towards training low skilled people for higher skilled positions, increasing tax credits for low-income people, and rightsizing government operations.
Have an awesome week.
Kevin MacDonald is a Business Consultant at L6S Business Consulting Inc (www.L6SBC.ca). L6S offers services in management consulting, Controller and CFO contracting, and lean management with either project work or teaching/mentoring of staff. Kevin has his CMA accounting designation along with a Black Belt in Lean Six Sigma.
Kevin is active in the community by volunteering for different groups and donates platelets at the Canadian Blood Services clinic on a bi-weekly basis.