Wednesday, September 06, 2006

Minimum Wages and Old Age Pensions

It is good to hear groups pressure government to raise the minimum wage. It is understandable that there is some apprehension among businesses about Reg Anstey's call for a further increase, since it will be a bit too much of an expense for some businesses. A St. John's Board of Trade representative said as much in a local media interview. However, that is not the whole picture by any means.

According to the BC Small Business Quarterly,
the effects of changes to the minimum wage tend to be exaggerated by both detractors and supporters. There are many factors that must be considered in determining the effect of a minimum wage increase, including the size of the wage bump, the business cycle, the kind of tax and benefit systems in place, and the labour supply, just to name some.
According to an OECD (Organization for Economic Cooperation and Development) report based on a 1998 study of minimum wage changes in nine countries,
a 10% increase in the minimum wage is associated with a 1.5 to 3% decline in teenage employment The evidence also
shows that hikes in the minimum, on their own, can explain only a small fraction of the large falls in teenage employment rates observed over the past two decades in almost all countries. The cross-country evidence suggests that the minimum wage has no significant impact on overall employment... So it may be misleading to suggest that a raise in a minimum wage will necessarily lead to widespread job loss.
http://www.bcstats.gov.bc.ca/pubs/sbq/sbq01q2.pdf
Certainly not all business is against the idea of raising minimum wage. From a U.S. site called Responsible Wealth, business leaders support a higher minimum wage. Here's one quote:
"The economy has been growing at a rapid rate, but the buying power of the minimum wage has contintued to decrease. It's time for businesses to step up to the plate and take some responsiblity. How can I expect an employee to have any dedication to this company if I do not treat all employees with respect by paying them a living wage?"
-Michele McGeoy, RH Solutions

In any case businesses in general may benefit because people could have more spending power, not to mention happier employees. It would be a boost for peoples' self esteem, motivation, and possibly their desire to perform good or better. Compliments on the job are wonderful incentive for work dedication, but a raise is a great positive incentive also.

There is a 25 ¢ raise coming in the new year, but that will make it only $ 7.00 / hour. That amounts to $14,560 a year. It's a pretty low amount to live on. That's more, perhaps in many cases, than the amount seniors 65 and over get from the Old Age Security (OAS) program each year. While seniors get a consumer price index increase four times a year, to help meet the cost of living increases, it is still a very low amount. Considering that their work lives have concluded and that means no chance of raises in their income, it seems fair to give them an actual raise, so that they may be ahead of the inflation rates. Those still in the work force often have opportunities to earn more money, by their experience, time on the job, and through education and skill development. In March of this year, the average Old Age Security Pension $460.92 (a month), and the Guaranteed Income Supplement for a single senior was $408.66 (a month).

Not all seniors live on the poverty line bracket, some may have other pensions and incomes. But for those on a low income, perhaps a start would be to either significantly decrease the income tax rate or get rid of the tax on OAS. As baby boomers continue to make the number of pensioners greater each year, this group could eventually compose one third of the population. They will have a huge impact on the economy. I don't imagine businesses would object to pensioners having more money in their pockets. That's not my reason, rather more out of respect for our seniors. When illness and health starts to be more of a consideration for them, it impacts on their individual freedoms. It would be nice to see that freedom expanded by increasing old age security rates, or cutting taxes, so that they have more income to do what they like with in their golden years.

4 comments:

NL-ExPatriate said...

Great post! Thanks for the links and supporting sites.

What amazes me is how little the federal government has tried to scale back their infrastructure and burden on the tax payers.

With all the talk of a global economy one would think that the best option for increasing the standard of living and becoming more competitive in a global market would be to put more money into consumers pockets by lowering taxes as opposed to increasing the minimum wage.

No matter how the end result is achieved, either through increasing the minimum wage (hence pricing ourselves out of the global market) of lowering taxes and big government. One thing is for sure that is the term working poor needs to be dealt with.

kodak said...

In the past several years the topic of the gap between rich and poor has come up in the media from time to time. Popular belief is
probably by default that the gap is growing, but it appears to be true. Here's a bit of reality from a CBC item in 2002, and a CTV article called Canada's Urban Poor Growing Poorer.

When the general economy booms then Canada continues to be proclaimed as one of the
strongest economic powers, G7, yet we have too many people considered working poor, or living on or near the poverty line, and that
includes seniors. What surprises me is how little media and government attention, that seniors on low incomes gets. But as baby boomers begin to form up to one third of the population, then we might hear more voices from the business community who want them to empty their pockets a bit more.

NL-ExPatriate said...

I did a post on this very topic a while back. Giving my take on why the gap is forming.

http://nl-outsidethebox.blogspot.com/2005_08_01_nl-outsidethebox_archive.html#112501384489133288

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