February 26, 2024

Economic development from the bottom-up

• Manitoba’s economic growth is estimated to be small at 0.4 percent in 2024. Household spending drives 65% of total spending in the Canadian Economy (Bank of Canada 2012). Manitoba businesses benefit from more local spending.

• Boosting the wages of the lowest-paid workers results in economic growth from the bottom up as minimum-wage workers spend all their earnings locally. 

• The province would also see increased income tax revenue from low-wage workers receiving a higher minimum wage. 

Impact of increasing the minimum wage for employers

• A phased-in approach to increasing the minimum wage through pre-announced steps to a living wage hour helps businesses by creating predictability.
• Increasing wages reduces employee turnover, which is costly as employers spend to hire and train people, and when people leave, expertise is lost. Additionally, a higher minimum wage can lead to more on-the-job training as businesses seek to invest in and retain workers.
• Waterloo estimated that the social return on their investment in a living wage for city employees was $1.24 to $1.80 for every dollar spent (Simpact Strategy Group, 2015). In addition, when employees have more time and money, they are able to better contribute to their community through volunteerism or other community engagement such as parent councils (Pathways to Potential, 2015).

Increases to the minimum wage and jobs

• Studies show that raising the minimum wage boosts incomes for low-income workers with only a small adverse impact on employment for teenagers. A Canadian Centre for Policy Alternatives study of all provincial minimum wages and employment changes from 1983 – 2012 found no consistent evidence that minimum wage affects employment levels. 
• Two leading American “meta-studies” that look at dozens of minimum wage studies show that minimum wage increases have little or no effect on employment levels or job growth (Schmitt 2013, Belman and Wolfson 2014). 
• In 2011 British Columbia increased the minimum wage by 28 percent to catch up for past inaction. This increase did not result in job losses for adult minimum-wage earners (Green 2015).
• Claims that jobs are lost by business lobbyists or right-leaning think tanks are not credible. David Green showed that studies being used by these groups are outdated and based on data from the 1990s or during a recession. 

The impact of minimum wage on small businesses

• Small businesses are service industry firms like corner stores, restaurants, coffee shops, and cleaning companies. When the minimum wage goes up, it goes up for all competitors. They are on the same playing field and can gradually adjust prices to cover the cost. In some instances small businesses lose employees to big companies who can pay more, like Amazon going to $15/ hour in the US. Raising the minimum wage increases the playing field for smaller firms that have to compete for employees with larger businesses.

The impact of minimum wage boost on prices

• A US study shows that for every 10% increase in the minimum wage prices increased 0.36%. The study also found that minimum wage increases lead to increased employment in low wage labour markets (MacDonald and Nilsson 2016). 
• When the minimum wage is boosted, low wage workers receive a net gain under the increases in the minimum wage despite facing slightly higher prices as this increases the total income of these low-wage workers (Hajer and Smirl 2022). 
• To respond to possible governments should develop a strategy for those in poverty who are not minimum wage earners, such as boosting Employment Income Assistance, which could be paid for by the increased income taxes received by higher earning minimum wage workers (Hajer and Smirl 2022). 

Does increasing the minimum wage cost or save government money?

• Poverty minimum wage means thousands of workers rely on being paid less than the minimum wage to survive. This is costly in terms of:
  • Rent Assist: The provincial shelter benefit for working poor provides funding between 30% of income and 75% of Median Market Rent. A higher minimum wage would reduce costs of operating the Rent Assist program by raising the incomes of the working poor.
  • Food bank use: the numbers of working poor using food banks is on the rise – from 18% in 2019 to 25% in 2023 (Winnipeg Free Press 2023). An increase in disposable income will increase the discretionary income of the poor, increase their consumer spending, and increase sales tax revenues.
  • Poverty: The cost of poverty in Saskatchewan, a province similar in many ways to Manitoba is $3.8 Billion dollars/ year. A portion of this expense is due to the impacts of poverty on the working poor: poverty impacts health and chronic diseases (diabetes, COPD, heart disease, mental health). Government will likely see reduced healthcare costs due to an increase in income for minimum wage earners.
  • Child poverty: children are poor because their families are poor. Manitoba consistently ranks amongst the highest rates of child poverty in Canada. An increase in the minimum wage will reduce child poverty and the associated long term detrimental effects on educational and ultimately labour market outcomes, and the associated taxes paid.

What are the benefits of a living minimum wage in Manitoba?

The benefits of gradually phasing in living wage would be far-reaching:

Women are more likely to work part-time, care for children and parents and work in low-wage industries, which makes them more likely to earn less and benefit from an increase.

Recent immigrants would benefit from an increase to the minimum wage, CCPA researcher David MacDonald found in Ontario one one-third of recent immigrants would see an increase in wages.

Recent immigrant women in particular would benefit, with 42% seeing a minimum wage increase, based on Ontario as an example.

Indigenous and racialized workers are more likely to be in low-wage work and would benefit from an increase in the minimum wage, although more research would need to be done to find out exactly how many would benefit.

Reversing troublesome income inequality 

• Earning a poverty wage means it is difficult to afford a nutritious diet, adequate uncrowded housing, healthy, safer neighbourhoods, and necessary medical care, such as prescriptions not covered by public health care. 
• Even when people are not living on low incomes, their relative position in society and job hierarchy also have important health impacts. Unequal societies, even affluent ones like the US and UK, have higher rates of stress, anxiety, depression, and addiction, which are caused by people’s reduced sense of control over their own lives and an overall decreased level of social coherence and security, compared to those in more egalitarian nation. 
• According to a recent study by Economist Dr. Ian Hudson of the University of Manitoba, in the five-year period between the early years of the 2010s and the end of that decade, market incomes in Manitoba have become more unequal, with the bottom two deciles suffering declining incomes. At the same time, the top 20 percent enjoyed income gains well above the Canadian average. Policies to strengthen the employment income of lower-income Manitobans will reverse this worrying trend, such as an increased minimum wage and rules that favour unionization. 

Sources:

Bank of Canada (2012) “Household Spending and Debt” https://www.bankofcanada.ca/wp-content/uploads/2011/02/household_spending_debt.pdf

Belman, Dale and Paul Wolfson (2014), “The New Minimum Wage Research” Employment Research Newsletter, Vol. 21, No. 2.

Green, David (2015). “The Case for Increasing the Minimum Wage: What does the academic literature tell us?” Vancouver: Canadian Centre for Policy Alternatives. 

Hajer, Jesse and Ellen Smirl (2020) Surviving on Minimum Wage: Lived Experiences of Manitoba Workers and Policy Implications. Winnipeg: Canadian Centre for Policy Alternatives.  

Schmitt, John (2013). “Why Does the Minimum Wage Have No Discernible Effect on Employment?”, Center for Economic and Policy Research.

Macdonald, David (2017). Ontario Needs a Raise: Who Benefits from a $15 Minimum Wage? Ottawa: Canadian Centre for Policy Alternatives. 

MacDonald, Daniel and Eric Nilsson 2016. The Effects of Increasing the Minimum Wage on Prices: Analyzing the Incidence of Policy Design and Context. California: Upjohn Institute for Employment Research