Sask. min.-wage earners increase productivity 26% over 5 years

Economically, that’s the message being sent by the Saskatchewan government in yesterday’s announcement of the fifty-cent increase in the mandatory minimum-wage to $10 per hour:

There are currently about 22,000 people in the province earning minimum wage.

“(The increase) will make sure that people at the lower end of the earnings scale have sufficient funds that they are able to adequately pay for housing, food and are able to participate in the prosperity of the province,” [Saskatchewan Labour Minister Don] Morgan said.

Since taking office, our government has increased minimum wage from $7.95 to $10 an hour,” Morgan said. “That’s an increase of nearly 26 per cent in five years – well ahead of the rate of inflation.”

Wait — you don’t agree with me? Increasing a person’s wage does not automatically increase a person’s productivity?

You know what? I think you’re right.

In fact, if anything, this increase could decrease productivity in the province in several ways:

  • Some businesses will have to cut back on staffing, which affects the productivity of these businesses
  • Even more businesses will have to raise prices on the consumer, increasing local inflation which, or course, has a greater relative impact on the poor
  • Workers who currently are not productive at $10/hour will be more likely to have trouble finding employment, which would affect their opportunity to gain skills and experience.

True, there is a benefit to the minimum-wage hike. It will help some of the those 22,000 minimum-wage workers when they get larger paychecks. However, the wage hike will not help:

  • Those who are not currently productive at $9.50/hour, as it would be even more difficult for them to find a job
  • Those minimum wage workers who are barely productive at $9.50/hour, as they may lose their jobs
  • Those currently making $10/hour or more (because why would their rates go up all of a sudden?)

That said, given our current labour market, we may not even need to raise minimum wage. That doesn’t stop one HR professor from using this as an excuse to raise the rate:

“We’ve got a really strong economy, we need to attract employees and if you are going to raise the minimum wage this is a good time,” said Long, who teaches a strategic compensation class at Edwards and has written the leading textbook in Canada on compensation, Strategic Compensation in Canada.

Long said many employers will still find it difficult to attract employees at the new rate.

“The reality is most employers recognize that it’s very difficult to hire people at the minimum wage.”

Then why raise the miniumum if the current minimum is meaningless?

I should have known this wasn’t the greatest idea when I see the NDP endorsing it:

NDP labour critic David Forbes said the increase is better late than never.

Forbes said the Sask. Party shouldn’t be taking credit for most of the minimum wage increases in the past five years.

“I was labour minister in September 2007 when we announced the increases that would be phased in to take us up to, I believe, $9.25 in 2009.”

Buried in the story comes the rub:

Marilyn Braun-Pollon, vice-president, Prairie and Agribusiness with the Canadian Federation of Independent Business (CFIB), said there are better ways to help low income earners than raising the minimum wage.

“It is evident that the provincial government has decided to make a very politically popular decision by this and it is leaving business owners picking up the tab,” Braun-Pollon said.

“Presently a full-time minimum wage earner can earn about 76 per cent of their annual income before starting to pay provincial taxes. We believe the government should ensure the lowincome earner keeps all of their earnings and pay no income tax at all.”

Not sure I agree with people not paying any tax whatsoever, but it’s a better alternative than increasing pressure on businesses.

Unfortunately, the story ends with a bout of myopic insanity with the NDP, the Saskatchewan Federation of Labour and the supposedly right-wing Saskatchewan Party all agreeing on the general course of action:

Saskatchewan Federation of Labour (SFL) president Larry Hubich said they are pleased the government is increasing the minimum wage, but said the minimum wage is too low to start with.

“We would argue that (the minimum wage) has been too low for a long time and that the government needs to bring in a formula that actually pegs it at rate of pay that provides for a living wage,” Hubich said.

“This (increase) only puts us in the middle of the pack.

“If the cost of living was to increase in the way that it has been over the past couple of years, we’ll soon find ourselves in Saskatchewan with the worst minimum wage in Canada (again).”

Forbes said the NDP wants to see the rate pegged to Consumer Price Index (CPI).

Morgan said the government is looking at some form of indexing the minimum wage.

It could be tied to average hourly wage, the CPI or another external indicator – and there would be an annual increase based on that, he said.

We’ll have a position formally taken on that (indexing the minimum wage) when we introduce the legislation in the fall,” Morgan said. [emphasis mine–ed.]

Tell me again why the electorate voted in a Sask Party government?

I got a question for Minister Morgan. Once the Saskatchewan economy cools down–and it will cool down–what impact will this rate hike have on local busiesses and the low-skills labour market? With the rate legislated and, possibly, indexed, there would be less flexibility for employers to make cuts in labour costs, even if the employees were willing to take a cut in pay in order to keep their jobs. This means people will lose their jobs in a downturn.

How popular will the Sask Party be when their actions exacerbated the impact of our next economic recession?

For me, if I were in power, I wouldn’t cut the minimum wage. It’s there, and any continuing arbitrary fiddling would only muck things up. I wouldn’t raise it, however. Over time, with inflation and market forces, labour costs will align with market demands, and the natural minimum wage level would find itself, like it always did before the labour movement started to pretend it knew how to operate the economy better than the invisible hand of the free market. People without skills would be able to find work suiting their own productivity and, in a relatively short period of time, they would be given the opportunity to develop those skills necessary to be more productive and start earning a higher wage.

If you think I’m being delusional, then why are unpaid internships at professional firms and political operations so highly valued by some college students? Why would a prospective tradesperson be willing to apprentice at a low wage? Why do some young people volunteer as a means to pad their resume? The reason is that these actions are ways for these “exploited workers” to gain valuable skills and experience, making them more attractive to higher-paying employers in the future.

Therefore, if someone wants to work for a low wage in order to get the necessary skills to move up the labour market more quickly, why does our government prevent him from doing so?

I’ll let you figure that one out.

More minimum wageizing here.

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