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Let me just say to begin with, I acknowledge that I have much to learn in this department. Gaining more knowledge on this topic is an endeavor I am currently trying to pursue, via my education in general, as well as through my current course selections, discussion, and personal reading choices. Like everyone else, I have an opinion. Regardless of whether we hold the same perspectives, right now it's a very relative topic and merits much discussion. The perspectives I am taking here may not fit for you. I urge all to read and educate themselves on the vast impacts that this will hold, both immediately and for our futures.
Within Ontario, new labor laws are being implemented, some immediately and, some transitionally. The one I'd like to focus on here for the moment is the new minimum wage.
Effective January 1, 2018, Ontario has put into effect the first stage of the minimum wage increase by upping the hourly pay minimum to $14 per hour, from the previous $11.60 per hour, a $2.40 increase. On January 1st, 2019 this will progress into the new effective minimum pay rate of $15 per hour. This wage hike is unprecedented in size and many speculations have been made in regards to the effects it will have on Canadian economy
To begin with, in my opinion, it's about time. Ethically speaking.
For years, minimum wage has failed to support the individuals that work for said rate of pay. It has not been capable of providing a livable wage to those who earn it as their living. It has not kept up adequately to cover the cost of living. How is a person living at this income to survive as a provider for their household? They don't. Welcome to our "working poor". It's unjust for a person to put in 40 hours or more a week and not be able to make ends meet. To my understanding, minimum wage jobs were intended to be for youth, transitioning into the workforce, not someone solely responsible for the bills required to meet a households needs.
Here's the thing: I am also an accounting student. This means I am learning about economics, in the technical sense, allowing me some further insight into the economical impacts of our governments decision.
Yet my opinion sits overall unchanged, though expanded.
Today I had Macroeconomics. We were discussing the impacts, graphically, of unemployment and minimum wage on the economy. So stems my post today.
By basic economic principles, as I best comprehend, the minimum wage floor being raised, as has been done, decreases the demand employers have for labor (# of available jobs) while the supply of labor rises, as less people are employed. The gap between the supply and the demand lines in this visual, at the relevant rate of pay is unemployment. Natural unemployment aside, it is theoretically non existent when the labor market holds at the equilibrium rate of pay. Here's a LINK to a multitude of images that can aid to depict what I am saying.
My problem with this is the multitude of other factors, both Macro and Micro economically and otherwise, that will also have an effect on the outcome, that are not being considered within this basic initial scope. None of these are visible when looking at such a simplistically outlined graph as described above, and I've read not enough in the news regarding them.
As this became a relative national discussion, and various Economists perspectives began to come out, I read an article online where 50 Economists collectively expressed their support for the minimum wage increase. This caught my attention as most of what I had read to the point was in opposition to this decision being a positive course for the Canadian economy. It led me to begin to recognize that there may be more positives, outside of the ethics of allowing all a chance to survive financially, to this decision. That it could also have a positive effect on the overall Canadian economy.
For example, the increased local spending of those now earning a higher wage. The poor are more likely to spend the additional earnings, whereas the financially stable are more likely to invest. Or the employers savings on a likely lower rate of turnover, resulting in less training costs and better staff capabilities. Would this not also aid to increase the production output or effectiveness per employee due to the individual employees human capital increase? These are just small pieces of the much bigger puzzle.
I am not worried about the big guys, the larger corporations who can afford the increase. They stand to lose what will be a minute fraction of their profits, whereas their employees life quality will change so much more for the positive. Unfortunately, and as per our capitalistic society, they will strive to ensure their full profit, and blame the little guy for wanting more of the pie, in whatever way they can. Cutting jobs to save money, substituting technology for minimum wage positions.... They must ensure they don't lose their cut. That's accounting. That's capitalism. Choose your justification, it is what it is.
I am worried about the smaller businesses. Many independent business owners, people who have started the smaller stores and operations within our community will be drastically effected. Some truly cannot afford such an increase at the pace it is being required of them. I am concerned that this may allow further "Walmart spread" where due to lack of ability to compete price wise, smaller local businesses may be wiped out by their larger competitors. These individuals have a smaller profit margin and thus less ability to adapt without increasing their prices and therefore may lose patronage. These are the people we must support with our newly acquired budgets, by directing our purchases to them. These businesses are the center pieces of our community. If we don't support them, we risk losing the innovation and compassion they offer to our community with their insight and personal touch. Many know their staff NEED this raise, and those who can manage to sustain their livelihoods, struggle to do so not only for their own good, but for those they provide an income to.
The points I have touched on briefly here, are but a small portion of the things we need to consider.
And to develop a realistic scope of the long term effect of this change, is going to take time. Jumping to conclusions at this point in time is unrealistic. Prior increases have been of a lesser size and therefore cant fully be used as a comparison. Our economy is changing, and jobs are being replaced via advancements in technology, regardless of this increase. Perhaps this has increased the pace of such, but it cannot be laid solely upon the new minimum wage; it was coming. Seasonal layoffs must be also considered. Not to mention recent major chain closures, such as Sears, which due to shutdown timeline on their part, is adding the the apparent loses.
I'd like to suggest that instead of further penalizing the working poor, for whom this can be a huge difference in quality of life, we embrace our societies ability to consider such an increase, as a method to further support the need for those of lower income to earn a viable living. Let's look towards adapting our views of equality and the supports necessary to aid the implementation of a more equal pay scale.
If capitalism cannot support a wage that a person can survive on, then do we not need to look at that, as opposed to penalizing those who are "failing" to survive within our current system? How can we best adjust our system to be more encompassing of the needs of alland not just the few? Why are we basing our evaluations of the economic success of a society on the top few percent, as opposed to how well a society does for its least financially stable population?
I may be wrong. Maybe I don't get something here. These are but some of the thoughts I've had so far on this topic. What are yours?