May 7, 2012
There’s an old saying “that the road to hell is paved with good intentions,” and it sprang to mind when I read David’s column this week.
Raising the minimum wage is one of those things that seems like a great idea in theory, but in practice only ends up hurting the very people it is supposed to help. That’s the thing about ideas that work in theory but not in practice — it means the theory is flawed.
The best way to help the unemployed is for them to get a job. Any job is better than no job. A job provides income, pride, self-worth and valuable experience. And the “free-market,” which David denigrates, is the best way to provide the most people with the best-paying jobs.
Minimum wage laws set an artificial floor for the price of non-skilled labour. This level is set arbitrarily by the provincial government based on what they think is politically “fair.” But the market also sets a price based on what employers are willing to pay for that task, and what potential employees are willing to accept.
Sometimes the wage the market sets is higher than the government-set minimum wage. A good example of this was Calgary in the oil boom a few years ago — when McDonald’s was advertising $18 per hour and full benefits for entry-level jobs. The minimum wage wasn’t helping anyone because employers had to fork out a higher rate just to attract entry-level workers.
The other scenario is that the minimum wage is above the market rate. That means employers hire fewer people. Why? Because the cost of each additional employee is greater. Just because the minimum wage goes up, doesn’t mean that employers have more money to hire the same number of people. If the minimum wage goes up above the market rate, fewer new entry-level positions will be created and some employers might be forced to lay off existing workers.
Higher minimum wages actually mean fewer jobs for low-income people in entry-level positions. It hurts the same poor people that David think it helps. And there’s proof — since the B.C. government announced it was jacking up the minimum wage to $10.25, there are 27,100 fewer part-time jobs in B.C. Heavens knows how many jobs a minimum wage at $19.14 would kill.
The answer is clear: to get the highest number of people working, let the free-market set wages.