Let’s Take Politics out of Minimum Wage Policy

Earlier today the BC government announced that they would be increasing the minimum wage by $0.20 and implementing a process to further increase it every September, based on increases to B.C.’s Consumer Price Index (CPI).

While I am sure we can all agree that minimum wage needs to increase and that tying it to the CPI is a good thing, in my view, this announcement is merely the latest iteration of a highly politicized process for determining increases to the minimum wage.

I think it’s time we changed the way minimum wage is determined. We need to get politics out of the process as much as possible. This isn’t wishful thinking – we only have to look at the steps Ontario is taking to develop a better way forward.

In June of 2013, the Ontario government struck a Minimum Wage Advisory Panel to examine Ontario’s minimum wage policy and provide advice on an approach for determining minimum wages in the future. The panel was made up of two business representatives, one organized labour representative, one non-union employee representative and one youth representative. They engaged in a wide sweeping consultation with Ontarians from all sectors of the economy. They held town halls in ten cities, and accepted submissions online, through mail and on their website.

This process culminated in the January 2014 release of the Minimum Wage Advisory Panel Report and Recommendations to the Minister of Labour.

This is a substantial document and I encourage anyone interested in this topic to give it a read. It is very thorough provides the reader with the research and debates surrounding minimum wage policy. It is not an ideological document, but rather willingly highlights controversial issues and the need for further study.

What is important to note right away is that the public feedback the panel received contained a “near universal agreement on making the process of revising minimum wages more transparent, predictable, fair and arms-length from government’s own near-term concerns.”

This was missing from today’s announcement about the B.C. increase — it was yet another political move that wasn’t actually addressing the full extent of the problem. Annual increases tied to inflation will only ensure minimum wage doesn’t fall further behind, rather than asking whether it still has some catching up to do before indexing minimum wage to the B.C. Consumer Price Index.

The Ontario Panel wasn’t tasked with determining if the minimum wage should go up, or what the baseline value should be, but rather to advise how a process could be developed that would address multiply stakeholders concerns. For business, predictability and gradual increases (as opposed to big increases all at once) are important; for labour and those employed at the minimum wage, it’s critical that a process be established that would protect them from falling behind while ensuring careful consideration was being taken to set a rate that improved quality of life.

The fact is, changes to the minimum wage can have wide spread, and not always obvious impacts on the economy. This report does an excellent job of canvassing the research on the economic impact of minimum wages on a variety of factors, including wage distribution, low-wage workers, education and poverty. Almost universally, the research available about the impacts of minimum wage increases is not overwhelmingly positive or overwhelmingly negative, but instead suggests the need for careful and considered policy, rather than using the minimum wage to accomplish political ends.

This is particularly true when it comes to using minimum wage policy to fight poverty. For this purpose, minimum wage is a very blunt tool.

For starters, the demographics of people earning minimum wage limits its effectiveness as a measure to fight against poverty. A large number of those earning minimum wage are in fact students, many who are still living at home with their parents. Furthermore, the report points out that many minimum wage jobs are often taken as stepping stones to higher paying jobs.

This is not to suggest that minimum wage policy has no role to play in fighting poverty. Rather minimum wage is just one of a suite of policies that could and should be advanced, including housing first, skills training and taxation reform, etc. As the panel noted:

“Any linkage between the minimum wage and poverty needs to be situated within the context of various other measures to address poverty…”

It is also important that we don’t limit the description of poverty to those earning the minimum wage. There is a large gap between the minimum wage in British Columbia and the living wage – that is the minimum wage needed to ensure you are meeting your basic needs. We need to ensure that we are providing the supports for people throughout this range of incomes.

The report from the Minimum Wage Advisory Panel concludes with 4 key recommendations:

Recommendation #1: Minimum wages should be revised annually by a percentage equal to the percent change in the Ontario Consumer Price Index.

Recommendation #2: Minimum wages should be revised annually, and a minimum four months’ notice of any wage change should be provided. The effective date of minimum wage changes should be April 1 of the following year. This would result in notification by December 1 of the previous year.

Recommendation #3: The Government should undertake a full review of the minimum wage rate and the revision process every five years. This review should be conducted by a panel of stakeholders and a neutral chair. The mandate of this Panel would be to review Ontario’s past experience with minimum wage revisions within the context of Ontario’s social and economic progress and prevailing practices in other jurisdictions to recommend changes that could better serve Ontario’s future needs.

Recommendation #4: To aid the full review process, and to ensure that Ontario’s minimum wage policies are in step with the needs of it’s citizens, the Government should establish an ongoing research program for data and information gathering its subsequent analysis to address policy-relevant minimum wage issues.

Some of these recommendations will look similar to today’s announcement in British Columbia – and indeed there are flashes of good policy in what the British Columbia government has proposed. Committing to an annual increase to the minimum wage tied to the British Columbia CPI is exactly what was recommended in Ontario. However the policy in British Columbia remains incomplete until we properly de-politicize it. That will take a commitment from the government to empower a properly independent panel to conduct the necessary consultations to determine what the appropriate minimum wage level is, and how future increases will be achieved and reviewed as time moves forward.

At the end of the day, my own view is that the minimum wage is certainly too low. However, I wouldn’t be able to point to a specific number that I believe is the “right” place for a minimum wage. We need an independent, non partisan British Columbia panel to conduct an exercise similar to what was done in Ontario, but expand its mandate to recommend a new minimum wage that puts the needs of British Columbians first.

Rather than pulling a number out of a hat, advancing clear, evidence-based policy on minimum wage that is arms-length from government would end the cycle of putting politics first, and instead start making working people the top priority.