Ontario’s new $11 minimum wage is good, but will satisfy almost no one: Mike Moffatt


Chart of Ontario's Minimum WageEarlier this week, the Ontario government announced released their Minimum Wage Advisory Panel’s report and recommendation. One of the big takeaways of the report was that the minimum wage should be tied to Ontario’s rate of inflation. This morning, the province took this advice by raising the minimum wage to $11.00 an hour, effective June 1, 2014.

The government arrived at the $11.00 figure by adjusting the current minimum wage for the accumulated level of inflation between 2010 (when the minimum wage was last increased) and now. This calculation provides a minimum wage in the range of $10.90; the government then rounded up to $11.00.  This is far from an ideal process, as it presupposes that the minimum wage was at the optimal level in 2010.  Given how little we know about the minimum wage, it would be surprising if the government had gotten it right four years ago.

Unusually, the government’s decision is one of those rare cases where a less than ideal process provided a great answer. Based on what we know about the minimum wage, I have estimated that Ontario can raise it to $11.25 before there are significant labour market effects. The two figures are close enough that I support the government’s increase to $11.00, despite my misgivings at the process which provided their answer.

This announcement is likely to please almost no one. The Ontario government was in a tough spot, with some business groups claiming, without a great deal of evidence, that even a small increase in the minimum wage is likely to cause widespread unemployment.  On the other hand, advocates of a $14/hr minimum wage refuse to acknowledge that there can ever be a trade-off between the minimum wage and employment or hours worked and the minimum wage can be raised indefinitely without consequence. Both positions are almost certainly incorrect. But as with too many areas, supporters of evidence based policy are drowned out by groups espousing hard-line ideological positions.

Chart showing descending list of Minimum Wages across Canada

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3 comments on “Ontario’s new $11 minimum wage is good, but will satisfy almost no one: Mike Moffatt

  1. Pingback: Sunday Link-Off: Just Super | The Lowdown Blog

  2. Tussock,Hurt some so that others may befenit? Even if you’re right about the befenit (and I assert that you are wrong), your position is scarcely moral.You’re still ignoring the fact that (especially in the highly competitive low-margin areas like, say The Warehouse and such), if someone is worth $5 / hour, and the Government makes you pay them $6 / hour, you either have to put prices up (hurting the minimum-wage earners the most, as they’re the ones who buy from such places), or not hire the person. You can’t have your cake, and eat it too.BTW, with respect to ‘perfect competition’ – have a read of , again from the :The “pure and perfect competition” doctrine seeks to replace the competition among producers in the creation of wealth, with a competition among consumers in the form of a mad scramble for a fixed stock of existing wealth. It seeks a state of affairs in which no additional buyer can obtain a product without depriving some other buyer of the goods he wants for that is what competition at full capacity would mean. It seeks to make men competitors in consumption rather than in production. It seeks to transform the competition of human beings into a competition of animals fighting over a static quantity of prey. In other words, when it denounces capitalism, it is denouncing the fact that capitalism is not ruled by the law of the jungle.

  3. duncan, and others inestteredThe mechanisms for increased employment through higher minimum wages are simple enough.Poor people spend all their money (and then some), so when you give them more of it to spend it boosts the entire economy equal to the drain it applies. It does hurt low-wage employers relative to others, but that’s usually a positive overall.It doesn’t hurt anyone much though, employers of minimum wage earners usually can’t function with fewer workers, and are normally only competing directly with other minimum wage employers: overall, no real ability to make layoffs in the first place, and little or no direct competative disadvantage with increased wage costs anyway.Most importantly, increasing low end wages allow poor people to have proportionately more discretionary spending, icreasing the free flow of money and thus making capitalism work better (assuming it’s reasonably free to work it’s magic).As for exporting poverty, as mentioned by Genius, yes, that’s rather unfortunate, and pretty much complete here. Perhaps if we had stronger unions or an actual left-wing government they’d have something to say about the import of slave-made goods.