NCPA - National Center for Policy Analysis

MINIMUM WAGE HIKES KILL JOBS: SK AND MB SHOULD TAKE NOTE

July 1, 2009

On May 1, Saskatchewan's minimum wage increased to C$9.25 per hour (up from $8.60).  Manitoba also increased its minimum wage last month, from $8.50 to $8.75 per hour, and has another bump-up (to $9.00 an hour) scheduled for October.  While minimum wage increases are made with the best of intentions, the unfortunate reality is that they result in serious and negative consequences, say economists Niels Veldhuis and Amela Karabegović, both with the Fraser Institute. 

Empirical evidence from Canada and around the world shows that higher minimum wages lead to lower employment levels, say the economists.  For instance, 14 Canadian studies have specifically examined the impact of minimum wage increases in the Canadian provinces.  They concluded that:

  • A 10 percent increase in the minimum wage is likely to decrease employment by 3 percent to 6 percent among workers between the ages of 15 and 24.
  • For the young workers who are most directly affected -- those earning between the old and new, higher minimum wage -- the impact is more acute, resulting in employment losses of 4.5 percent to 20 percent.
  • Using evidence from Canada, the economists estimate that increasing Manitoba's minimum wage to $9.00 per hour (a 5.9 percent increase) would lead to a loss of up to 3,500 jobs for workers aged 15 to 24.
  • Increasing Saskatchewan's minimum wage from $8.60 to $9.25 (a 7.6 percent increase) would lead to a loss of up to 4,000 jobs.

Those fortunate enough to retain their jobs after the minimum wage is increased could see reductions in their hours, fringe benefits, and/or training, say Veldhuis and Karabegović.  A recent study in the Journal of Labor Economics found that a 10 percent increase in the minimum wage reduced the proportion of minimum wage workers (aged 20 to 24) who received on-the-job training by two percentage points.  Even if low-skilled workers retain their jobs, they may actually not be better off, depending on changes to their benefits and training,

Source: Niels Veldhuis and Amela Karabegović, "Minimum Wage Hikes Kill Jobs," Fraser Institute, June 2009.

 

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