June 4, 2017
On Tuesday, Ontario’s provincial government, undeterred by the province’s title-claim to the world’s most indebted sub-sovereign borrower (one-third the population of California, and twice the debt!), raised its minimum wage to a whopping $15 per hour.
Left-leaning lemmings were instantly filled with vim and vigour, proclaiming the minimum wage hike a social justice victory.
The Canadian Broadcasting Corporation (CBC) led with, “How the Liberals went from cool to hot on $15 minimum wage.” Abandoning business decay as cause for concern, CBC ran another headline, “Ontario’s minimum wage raise a ‘small business killer,’ say critics, but for many it means feeling ‘human’.”
Reveling in hysteria and self-dramatization, liberals immediately decried the new law’s detractors as being cold-hearted and uncaring toward “working class families”. As the CBC’s own headline suggests, if you oppose the government-mandated minimum wage, you oppose people “feeling human.”
Here, in no particular order, are a list of reasons Canada’s Liberal government is making a terrible mistake by raising the minimum wage.
A Minimum Wage Hike Prices Low Skilled Workers Out of the Job Market
I got my first job in the summer of 2010. I was 17 years old, working as a lifeguard earning a generous (personally, I was very happy with it) $14 per hour.
At the time, the minimum wage was around $10 per hour.
I was making close to 50% over the minimum because prior to landing the job, I’d spent more summers than I can recall taking swimming lessons, as well as taking and completing first aid and lifeguarding courses.
What do you think would happen if the bare minimum you’re legally allowed to pay an employee jumps up to $15?
Naturally, lifeguards will also need a sizeable raise to maintain an incentive for people to expend the time and money on the required training. There’d be no reason to go through the trouble of becoming a lifeguard if you’re paid the same wage as a grocery store employee, who requires no prerequisite training, and has far less responsibilities.
This also means that companies employing lifeguards will prioritize hiring and keeping people with experience. This logic applies to jobs across the board. What you’ve effectively done is price low-skilled and inexperienced workers entirely out of the labor force. Their new “minimum wage” is now zero.
Youth unemployment in Ontario is higher than the national average. A recently published government jobs report showed that despite a slight January decline in national unemployment (5,700 less persons working than January of 2016), youth unemployment in Ontario was nearly 3 times harder hit (18,900 persons between 18 and 24 working in February of 2017 than in February of 2016). The Liberal government has a genius plan to address this. Make hiring unskilled, inexperienced young people more expensive!
Wage Control is Inherently Immoral
A $15 hour minimum wage makes a $14 hourly wage illegal. Despite the torrent of communist commentary suggesting that it is the government’s job to protect a worker’s right to a fair wage, the truth is that there’s no such thing as a “fair wage.” Wages are set by supply and demand in the market, not some magic fairness-wand waved by progressives.
Employment is a voluntary contract between two parties; an employer and an employee. There is objectively no wrongdoing in an employer offering to pay a wage lower than some arbitrary magic number heralded by liberals ($15 today, $20 tomorrow).
An employee can accept or turn down the contract, and if the offered wage is lower than the market wage, go and find a job at a competing firm for a higher wage.
What is immoral, however, is a breach of this contract by an unaffiliated third party with a monopoly on the use of force. In effect, this is akin to leveraging a gun to tell an employee it’s illegal for him to accept employment at $14 per hour.
Rick Friedman/Corbis via Getty Images
CEOs Make *Way* Too Much Money
This talking point is a favorite among far-left class warriors. The CEO of Walmart makes around $30 million per year (a salary decided upon by the firm’s board of directors). He oversees a workforce of 2.3 million individuals in America.
What exactly is it that leftists intend to do with the CEO’s take-home pay once they get their hands on it? Evenly distributed amongst Walmart staff, that’s about $15 per person.
What you as an employer pay an employee for a particular job is determined by how many you can find that can do this job (supply), relative to how important this job is for the success and livelihood of your firm (demand).
If you can’t fathom how the CEO of Walmart makes more in a day than a retail employee does in a year, consider how many people in America can run a multi-billion dollar enterprise. Now compare that to how many people can smile and say, “Thank you for shopping at Walmart.”
This isn’t an effort to demean Walmart retail employees. This argument could be applied to any corporation, in fact. It is simply important to point out how the ratio between supply and demand determines wages.
BUT WHAT ABOUT DENMARK?
This talking point comes up A LOT. From soccer to socialism, as with all things European, liberals have an affinity for the Nordic nations, bolstering nearly every one of their arguments with the addendum of “but Norway does it!”
First, this is objectively false. Denmark has no government-mandated minimum wage. The workforce is heavily unionized and rife with collective bargaining agreements.
Now this of course won’t deter arguing liberals, as they’ll claim the vagaries of government enforced vs. union negotiated wages aren’t relevant: “The wages are still higher!”
This too is false. As noted by Tim Worstall in Forbes, you can’t compare an hourly wage in Denmark to an hourly wage in North America without also taking into account what you can actually buy with those wages in their respective countries – purchasing power. Once you actually adjust for Purchasing Power Parity (PPP), the wages are effectively equivalent.
Going further, once you account for the draconian tax rates plaguing the people of Denmark (At 60.2%, Denmark last year had the highest top personal income tax rate among the 34 countries in the OECD) the average employee in Canada or the United States actually has higher take-home pay.
Why Can’t We Just Share the Profits, Man?
Another common talking point from liberals (who are far less fluent in economics than they are in French) is: “Well, why can’t the company SHARE the profits?”
A key reason people seek employment as opposed to venturing into investment or entrepreneurship is the lower associated risk.
Sure, the company’s owners take on profits when business is going well, but who do liberals think absorb losses? (Hint: the very same owners!)
If leftists really want company employees to take on the same risks that come with being an owner, they should at least be consistent and contend that they correspondingly share the losses. But could you imagine company owners dipping into their employee’s pockets when experiencing quarterly losses? Guess how long that system would last.
Artificial wage hikes instituted by government increase the cost to doing business. Businesses have to adjust to higher costs. This means they either have to (1) raise prices to appropriately match higher costs, or (2) reduce staff (layoffs!), offering fewer services, and moving to automation.
If leftists are content with putting low-skilled workers out of a job insofar as they win a handful more votes at the ballot-box, they’d do us all a favor by starting with their own. After all, how difficult could it be to automate a machine to parrot, “The government should do it!”?