This past spring, New Brunswick raised its minimum wage once again. That was a major mistake, according to a new study from the Halifax-based Atlantic Institute for Market Studies (AIMS).
New Brunswick's new minimum wage is $11 an hour, a 35¢ jump from the previous level and the 12th increase since 2007. In fact, New Brunswickers' wages are increasing at the fastest rate in Canada.
This recent increase is good news for the entire province, says Premier Brian Gallant: "We understand that when you put more money into the pockets of New Brunswickers, they will buy and invest more. This helps strengthen the economy."
No, it doesn't, the AIMS report concludes. Dismissing contentions that higher minimum wage levels reduce poverty while having only negligible effects on employment, the report's authors - Matthew Lau, an economics writer, and AIMS president and CEO Marco Navarro-Génie - point to what they found to be serious drawbacks to hiking a minimum wage: the higher the hourly rate, the more low-skilled workers will be legally priced out of employment. Oh, yes, the report adds, most empirical evidence supports this assertion.
The AIMS report suggests the research demonstrates that raising the minimum wage is not an effective anti-poverty device and calls on all four provincial governments in Atlantic Canada to scrap legislation for raising minimum wages.
That's unlikely to happen, especially in New Brunswick, which heralds its rising minimum wage. According to that province's Liberal government, New Brunswick consistently has been among the growth leaders in average weekly earnings in recent months and continues to lead the country in growth on a year-to-date basis. The minimum wage increases, the Liberals assert, have contributed to that growth.
Indeed, some businesses laud the minimum wage hikes, pointing to improved staff retention and morale - benefits that spiral outward to include customers and the economy at large. But the AIMS also takes aim at that contention.
"Wages are subject to the incontrovertible law of demand," the report states. "Thus, if the government raises the cost of employing low-skilled workers through minimum wage legislation, then fewer low-skilled workers will be employed."
Particularly hard hit by minimum wage increases, the AIMS report argues, are young people - a key demographic for retention in an aging province such as New Brunswick. Canadian studies cited by the report found that raising the minimum wage by 10% reduces youth employment by 3%-6%.
The report concludes that: "Raising the minimum wage by upwards of 50% won't help people without jobs. It won't help young people find jobs. It will clearly increase the challenges faced by small businesses and non-profits. It won't reduce poverty."
The New Brunswick government is likely to engage in this debate, having identified minimum wage increases as a central component in its anti-poverty measures. But, ultimately, for the province's premier, the fundamental issue may not be economic at all.
"This [rise] improves New Brunswick families' quality of life," Gallant says, "as they can invest in education and training, healthy living and their communities."
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