OTTAWA—There is no consistent connection between higher minimum wages and employment levels in Canada, says a study released today by the Canadian Centre for Policy Alternatives (CCPA).
The report, by CCPA research associates and Unifor economists Jordan Brennan and Jim Stanford, conducts a wide empirical study of Canadian employment data in search of any evidence that higher minimum wages reduce employment or increase unemployment. It examines the relationship between minimum wages and employment in all ten Canadian provinces between 1983 and 2012, and finds no consistent evidence that minimum wage levels affect employment in either direction. Instead, the research concludes that employment levels are overwhelmingly determined by larger macroeconomic factors.
In the few instances where an empirical connection between minimum wages and employment outcomes is found, it is almost as likely to be positive as negative. In other words, higher minimum wages could just as easily result in stronger employment performance (not weaker).
“Those with a vested interest in keeping wages down have exaggerated the alleged disemployment effects of raising the minimum wage,” says Brennan. “But there is no consistent evidence in aggregate employment data that any such disemployment effect exists.”
Canadian policy makers should feel confident to move ahead with boosting the minimum wage, hopefully toward a living wage level, in a gradual and ongoing manner, without fearing that this will negatively shock employment levels, the authors suggest.
“Our results confirm that stimulating more purchasing power in the economy is the most important way to support job creation,” says Stanford. “The stagnation of overall wage levels has contributed to the weak demand conditions holding back Canada’s economy, and increasing the minimum wage would in fact help to address that weakness.”
The authors conclude that stronger minimum wages can be an important and effective tool in boosting earnings for low-waged workers, promoting greater equality across employed persons, stabilizing or improving the total labour income share of GDP, and reducing poverty. “The minimum wage is not solely an anti-poverty measure; it has a broader effect in strengthening labour incomes,” says Brennan.
Dispelling Minimum Wage Mythology: The minimum wage and the impact on jobs in Canada, 1983-2012 is available on the CCPA website.
For more information contact Kerri-Anne Finn, CCPA Senior Communications Officer, at 613-563-1341 x306.