The increase in the minimum wage will lose 60,000 jobs in Canada

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Experts warn governments that a rise too sharply and too fast in the minimum wage could be counter-productive by undermining the competitiveness of enterprises, among others.

The increase in the minimum wage in Canada will result in the short term by the loss of 60 000 jobs and economic growth to be slightly less strong, writes an analysis of the Bank of Canada, but also by an increase in the income of workers at the bottom of the scale.


The marked increase in the minimum wage in Ontario and Alberta, as well as its more modest increase in Quebec and British Columbia will, as one might expect, a positive impact on the income of the workers, concluded economists of the canadian central bank, in a note to analytics last week. Average real wages in Canada is expected to increase to about 0.7 % by 2019, with, of course, the main beneficiaries are the approximately 8 % of canadian workers at the minimum wage, but also, to a lesser extent, the employees win just over and belonging to the group 15 % of workers to be paid less.


The increase of these wages, however, has not only positive effects, warn the authors of the note. It will increase the costs of operation of the enterprises, who will have no choice but to pass on at least part of the bill to the consumer, increasing by approximately 0.1 percentage point to inflation and reducing economic growth of 0.1 % by 2019. The increase in the purchasing power of the lowest-paid workers will benefit certainly to the economy, we are told, but as they only account for approximately 4 % of all consumers, the general rise in the cost of living and its upward influence on interest rates, “contrebalanceraient ample” this beneficial effect.


The slight economic slowdown is expected to be sufficient to reduce the total number of hours worked in Canada by 0.3 %, equivalent to 60,000 jobs, if we rely on the current average. This estimate of job losses is rather conservative, suggest the experts of the bank, who point out that a simple accounting approach to the set rather within a range from 30 000 to 140 000 jobs lost.


The increases promised


The increase in the minimum wage has recently been adopted as one of the main workhorses of the trade unions and of the struggle movement against poverty in Canada. Inspired by similar campaigns in the United States, they have made the threshold of $ 15 per hour an absolute minimum to be reached more quickly.


This appeal was heard in Ontario, where the minimum wage is increased from $ 11.40 per hour this fall to to $ 14 this week, and has yet to increase to $ 15 in January next year. It has also been heard in Alberta, where the minimum wage has increased to 12.20 per hour to 13,60 $ this fall, and will jump up to $ 15 the next fall.


The increase will be much less pronounced in Quebec, with small jumps each year that have brought the minimum wage to $ 10.55 per hour by 2016 to 11.25 $ currently and will 12,10 $ in may 2019. More modest also, British Columbia has passed its own threshold, carrying a 10.85 to $ 11,35 $ in September. The economists of the Bank of Canada estimate the magnitude of the changes or their impact on the canadian economy more negligible in the other provinces, such as Saskatchewan (10,96 $), Manitoba (11,15 $) and New Brunswick (11 $).


Impacts the most significant long-term ?


Experts warn governments that a rise too sharply and too fast in the minimum wage could be counter-productive by undermining the competitiveness of businesses, destroying jobs, or by encouraging the school dropouts. Some also argue that the minimum wage must take into account the cost of living, for example, lower in Québec than in Ontario or Alberta.


In fact, “the long-term impact [of the increases announced in the minimum wage] could be substantially larger than their effects in the short term,” note the economists of the Bank of Canada. The higher wages may encourage young people to leave school early for the labour market, but also to encourage businesses to replace workers with machines. They could also harm the development of some sectors, including the retail trade, where lie many of the workers that are trying to help. “The increases in the minimum wage could have long-term effects because of the automation, productivity gains, or the evolution of the activity rate, but these effects can be either positive or negative” for the economy as for the workers, they concluded. All of this is ” ambiguous “.