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Minimum wage increase would harm economy: Fraser Institute

An increase of B.C.'s minimum wage to $10 would result in thousands of job losses, according to a Fraser Institute report released yesterday.

But the Canadian Centre for Policy Alternatives (CCPA) and the B.C. Federation of Labour have criticized the report's findings.

According to the report, between 11,000 and 52,000 jobs could be lost in B.C. if the minimum wage was increased to $10 per hour.

"If you increase the minimum wage -- particularly for young individuals 15-24 years old -- you're going to see decreased employment, decreased job benefits, decreased job training, and most likely see increased high school dropout rates," report co-author Niels Veldhuis said. “I think it's much better to allow employees and employers to negotiate mutually beneficial terms rather than have it dictated.”

The CCPA countered the claims, saying many studies have concluded that minimum wage increases would not hurt employment levels.

"Most mainstream economists are of the opinion that modest increases in minimum wage will not kill jobs," CCPA economist Iglika Ivanova said. She cited a 2006 joint statement issued by 650 American economists, stating a minimum wage increase would improve the well-being of low wage workers and would not have an adverse effect on jobs.

Ivanova said tying minimum wage increases to inflation would minimize potential job losses. "Indexing the minimum wage to inflation makes it very predictable, so that employers can see what will happen to their wage bill next year," Ivanova said. "It'll be better for workers because their earnings will not erode as inflation goes up, and it'll be better for the employers because they will not have to fear lump sum increases."

Ivanova said the real value of B.C.'s minimum wage has eroded by 12% over the past 8 years due to inflation.

"The minimum wage has not changed since 2001, but inflation has crept up," Ivanova said. "By doing nothing, we're actually decreasing the minimum wage."

The Fraser Institute said there is a public misconception that an increase in minimum wages would help reduce poverty. "Most minimum wage workers are young, and most of them live at home either with relatives or parents," Veldhuis said. "The benefits of an increased minimum wage won't go to the people that advocates like to say that they would go to."

The CCPA argued 44 per cent of minimum wage earners are over 25, and that income mobility is declining in Canada. “We shouldn’t be complacent and think ‘Those people are students, they’ll graduate and get betters jobs’,” Ivanova said. “The workers over 25 probably have completed their education and are not going any further.”

To combat high school dropout rates, Ivanova said school age requirement legislation is more effective at keeping teenagers in school than a reduced minimum wage.

The B.C. Federation of Labour released a statement yesterday dismissing the Fraser Institute’s findings.

“The Fraser Institute report relies on numbers that show many minimum wage earners live with family or relatives but ignores the reality that living independently on the current minimum wage is impossible,” the statement said. “The idea that increasing the minimum wage will lead to job losses has been discredited by renowned and independent economists…Provincial governments all across the country have acknowledged this and have raised or are preparing to raise their minimum wages.”

The Yukon instituted annual minimum wage increase policies in 2006, followed by Alberta in 2007. Newfoundland plans to gradually increase its minimum wage to $10 by 2010.

Sean Casey reports for The Hook.

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