After Alberta announced they will be raising their minimum wage from $10.20 to $15 an hour by 2018, talks of boosting wages in other provinces have begun. But one study says that thinking is misguided.
The Fraser Institute released a study Thursday that suggests raising the minimum wage is likely to do little to reduce poverty, since 60% of those who would benefit are teenagers or young adults working their first jobs, and 85% live with their parents or relatives.
Beyond that, 88% of minimum wage workers have managed to stay above Statistics Canada’s definition of poverty, says the study.
“Despite good intentions, the evidence shows increasing the minimum wage is not an effective policy for helping Canadians struggling with poverty,” says study co-author Charles Lammam.
“The perception that the typical minimum-wage earner is a single parent struggling to survive does not align with the facts.”
The study adds that raising the minimum wage could do more harm than good – by making labour more expensive, many low-skilled workers may have a tougher time entering the job market. A 10% increase in the minimum wage may result in a 6% reduction in employment among teens and young adults.
The Fraser Institute says a better option would be to increase the Working Income Tax Benefit, allowing more low-wage workers to receive tax credits.
Provincial coordinator of First Call Adrienne Montani tells Vancity Buzz the study fails to consider that young adults who earn minimum wage may live at home because they can’t afford to move out.
“The reason so many 20-somethings are living at home longer is because they can’t earn enough to match the costs of tuition, etcetera,” she says.
Montani adds many single parents may not work minimum wage jobs because they can’t earn enough money to pay for daycare, so working becomes something of a fruitless effort.