Ontario will regret its minimum wage experiment

July 12, 2017

mcdonalds-kiosks-600.jpgThere comes a point when a politician is so tainted by scandal, waste, incompetence and hubris that their approval rating can’t go any lower. I thought Premier Kathleen Wynne had reached that point last year after two Liberals, including Ontario Liberal Party CEO Pat Sorbara, were charged with bribery in connection to the Sudbury by-election scandal.

I should have known better. An Angus Reid poll conducted in March showed Wynne’s approval rating had hit a new low of 12%. By comparison, her predecessor Dalton McGuinty had an approval rating of 23% in 2012 after he had already resigned in disgrace. It’s hard to fathom how Premier Wynne has avoided having to do the same.

So what’s a Liberal politician to do when they’re this unpopular? The exact same thing they’ve been doing all along: announce more entitlements and handouts! In what we all hope will be a futile attempt to save her job, Wynne has rolled out one giveaway after another: free prescription drugs for those 24 and under, a 7.5% raise for public sector workers (stunning even the unions), $100 million in corporate welfare to Ford, the list goes on. All to be paid for in full by future generations of Ontarians, of course.

Her latest Hail Mary is a massive increase in Ontario’s minimum wage from $11.40 to $15 within the next 18 months. This cynical vote-grab would have disastrous consequences for the province’s businesses and low-wage workers. Basic economics dictates that a minimum wage increases unemployment, decreases hours worked, increases the cost of basic goods, and forces businesses to close.

Sadly, economists often fall prey to their own political bias, same as those in every other field of study. The science’s usual handful of leftist cranks, led by self-proclaimed “lefty economist” Michal Rozworski, have signed a letter declaring Wynne’s ham-handed intervention to be a fantastic idea. Most every person in Canada could tell you that the more expensive something is, the less people will want it. This is also true of labour. In an impressive feat of mental gymnastics, these economists insist that is not the case. They point out the many studies proving that unemployment can still go down and the economy can still grow, even after a minimum wage increase.

But nobody claims otherwise. Economies are complex things, with many competing and interacting variables. Imagine seeing a new doctor after recovering from an accident that broke your leg. He examines the healed leg and says: “Look at that, the accident didn’t cause any damage at all!” You point out that without the cast you wore for months and the gruelling physiotherapy, the leg would still be broken – only for him to put his hands over his ears and, with a “NOOOOOO!!!”, run screaming from the room. Or imagine a physicist who, after seeing a plane take off, concludes that gravity no longer exists and directs everyone around him to leap off the nearest cliff.

These sorts of episodes are thankfully rare in medicine and physics, but continue to persist in economics. Just as a broken leg can heal and an aircraft can take off despite gravity, so too can an economy grow even while hamstrung by a minimum wage.

The “progressive” economists conclude their embarrassing letter with the old “[economics is the] dismal science” cliché. They probably find it dismal because it consistently refutes their worldview.

When it comes to economic research, there has never been as detailed data or as advanced methodologies as are available today. This could be why the fight over minimum wages seems to be intensifying. Union-backed “Fight for $15” agitators are scrambling to push forward minimum wage hikes across North America. Some are likely aware that the longer they wait, the more data will come out proving how damaging their ideas are to those they’re supposed to help.

Fortunately for the rest of us, the wait seems to be ending. In 2014, Seattle decided to increase its minimum wage from $9.47 to $15 by 2017. To the city’s credit, it commissioned a team at the University of Washington to study the impact of its experiment. The researchers had unprecedented access to administrative data on wages, hours worked, and the number of minimum wage jobs in the city. They found going from $11 in 2015 to $13 in 2016 cost the average low-wage worker $125 a month in lost hours. This result is even worse than most minimum wage opponents would have predicted. In Missouri, state lawmakers are trying to prevent a similar situation by forcing St. Louis to roll back its recent increase from $7.70 to $10. As other increases come into effect in places like New York City and California, even more convincing evidence against the practice will pile up.

It is critical that Ontarians resist the pressure to cave to powerful unions and misguided protestors. If we don’t, our province will suffer the same ill effects as Seattle and elsewhere.



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