Alberta’s minimum wage jumped to $13.60 per hour yesterday. This is the work of an accidental NDP government that is intent upon implementing their progressive ideology in a hurry.
The NDP understand that they need to implement as many of their policies as possible before they are banished to the dustbin of history in 2019.
Massive increases in the minimum wage are bad economic policy. As previously discussed big increases to the minimum wage in the American setting have been shown to be the stuff of folly:
“Those entrepreneurs who didn’t reduce wage costs are likely facing stress if they are still in business. The outcome of raising the minimum wage has been to hurt poor people. Time magazine predicted this outcome. Unfortunately, the Democratic party didn’t see what was coming.”
Raising the minimum wage ultimately hurts poor people because business owners find ways to cut labour costs to stay in business. Some owners will work more hours themselves. Some companies will cut back on their hours of operation.
Business will move to more technological solutions such as self-serve kiosks at fast food restaurants and self-checkouts at grocery stores. Even though minimum wage workers make more hourly they find their hours cut, or worse lose their hobs.
The minimum wage increase could have a significant downward impact on employment in Alberta. As the Edmonton Journal reported on the work of Joseph Marchand:
“The NDP plan to boost the province’s minimum wage to $15 an hour next year could lead to the loss of 25,000 jobs, according to a new study by a University of Alberta economist.”
Marchand’s work intuitively makes sense. The Alberta economy is still suffering from the effects of the oil crash. Tens of thousands of private sector jobs have been lost in the economy. Salaries are not rising.
Businesses will be hard pressed to pass higher labour costs directly onto consumers. Successful businesses will cut costs as highlighted above.
Why the minimum wage won’t work as a wedge issue.
The NDP will hit their promised minimum wage of $15.00 per hour before the 2019 election. The idea of using the minimum wage as a wedge issue against the United Conservative Party (UCP) intuitively seemed to make sense. It makes sense if the UCP allow it to become an issue.
Unfortunately for the NDP’s campaign fortunes that minimum wage is unlikely to be a campaign issue. Jason Kenney, the front-runner for the leadership of the UCP promises to maintain the minimum wage at $15.00 if he becomes premier in 2019.
Kenney’s reasoning is sound. Promising to cut the minimum wage is really the only way the UCP could lose to the NDP under his leadership.
Kenney recognizes that another term of the Notley government would be devastating for the Alberta economy. A potential wage cut is a huge incentive to vote against someone.
He also advocates for the more prudent choice of freezing the minimum wage.
The decision to freeze the minimum wage is the lesser of two evils. Another NDP government would risk making the current malaise in the Alberta economy a decades-long problem.
That would create a lost generation of economic opportunity for Albertans. Governing is about choices. Jason Kenney has made a smart choice on the NDP minimum wage increase and it is one of many reasons why he should be our next premier.