Minimum Wage

In 1980, I was driving back from Montreal on a late April evening, when I picked up a hitchhiker shivering beside the road in a jean-jacket. He was on his way to Toronto from Newfoundland. He had sent his belongings ahead by bus, but was conserving funds by hitching rides. It turned out he had been laid off from a St. John’s shipyard, and having only worked there a couple of years had concluded he would be one of the last called back. This was before any Newfoundland oil boom and before the Alberta oil sands would draw so many of his compatriots West. He had a line, through a friend, on a manufacturing job in Toronto, and was hoping to be able to send money home to his family as soon as he was settled. The job paid about $5.00 per hour I think, roughly the equivalent of the minimum wage of $15.00 which will apply in Ontario in 2019.

The encounter has stayed with me. He was the first of many examples of people I have met, and sometimes employed, who are willing to displace themselves, separate from their families, and work a solid week, and who ask so little in return. This man figured that on $5.00 an hour, he could get a bed, feed himself, manage a couple of beers on the weekend, and send money back to St. John’s. He knew there was a strong Newfoundland community in Toronto, and though he wished he had not had to separate from his family, he felt he would have friends and company. He had no desire to accept unemployment insurance or welfare.

The controversy over the proposed minimum wage increase in Ontario brought this memory back to mind. As my thinking evolved over the years, I came to the principle that if two people are working, as a minimum in a fair society they would be able to feed themselves, shelter themselves, manage transportation to work, replace themselves (raise two children), provide the necessary support for the children’s education or before that child care (either by one partner foregoing income or through daycare), and be able to afford occasional distractions like a few beers on the weekend, the odd movie, perhaps a camping holiday, and some kind of regular recreation.

When I became an employer, I quickly realized that I could not even necessarily do this for my own employees: unless my competitors did it too, I would face a cost disadvantage that would make it hard for me to get customers. Not all business owners had the same view of fair pay as I did. Employment was rarely so full as to give employees enough bargaining power to demand it, and the smaller businesses that occupied my industry meant employees were rarely in large enough groups to negotiate effectively (as they did in unionized environments).

People who had jobs, I felt, should not be dependent on redistribution, either from governments or charities like food banks: working full-time should earn you the pride of independence. If you put forty hours into the economy in a week, it should earn a living.

If the minimum wage is set at a level consistent with that, and everyone must pay it, then everyone can afford to pay it, because the competition must pay it too.

Of course, this will result in price increases. Products and services will have to cost what it takes to make them at a living wage. But a minimum wage set at a living level means I can be a good employer without losing business to someone who is paying the lowest cost the market will bear.

Higher prices will affect everyone, both those on minimum wage and those earning more. A minimum wage is income redistribution without taxation or charity: it takes from those who buy and gives to those who make or serve. The important thing that this ignores though is that people on minimum wage or close to it (all of whom receive increases when the minimum is increased, as differentials are maintained) need to spend their money: nearly all of it goes into the economy and creates more demand for goods and services and expands the economy, creating jobs and profits, and even higher wages. Everyone benefits from this. Lower prices achieved by lower wages on the other hand mean more money in the pockets of the better off, and a higher percentage of it will be saved rather than circulated in the consumer economy.

I am very happy that in Canada we can use our initiative, skills, and efforts to make a greater contribution to the economy and reap a greater reward in return. This results in vastly different rewards for people of different ability, ambition, determination, appetite for risk and levels of effort. However, unless we ensure that everyone who contributes to the economy is fairly rewarded, we risk leaving people behind. It is of course important for there to be consequences for poor choices as there are rewards for good ones. Those consequences must not however create barriers to children’s opportunities. Differences in outcomes are only justifiable if there is equal opportunity to succeed on merit. A minimum wage set at a living level is a necessary (but not sufficient) component in ensuring that all children can reach their full potential.

Competition from other countries with lower cost structures is no excuse for impoverishing working Ontarians. Our highly-educated workforce, stable government, strong legal framework, enforceable contracts, public health system, and developed infrastructure are all advantages over low wage economies. We need to choose the industries where these give us an advantage that offsets our higher wages, and we need to innovate and automate to increase our productivity and efficiency. A lower than living wage is no less a crutch than a low Canadian dollar, hiding a lack of true competitiveness.