Does the minimum wage increase have a sustainable effect?

by houseryerson

Today, Ontario Premier Kathleen Wynne announced a 75cent increase in Ontario’s minimum wage going from $10.25/her to $11.00/her. Since the news came out, mixed reactions have plagued the province. Plenty of middle/upper class people believing this to be a bad idea while lower class people responding with anger claiming the former don’t realize the struggles the lower class face. The question is, does the minimum wage really help out the lower class?

Below are the main pros and cons of the minimum wage increase that are widely argued:

PROS:

  • Helps out those actually in need money

This is the people working at McDonalds, the waiters and waitresses, the people working two minimum wage jobs. A minimum wage increase for these sort of people working in large companies could help and actually be beneficial unless the company decides to raise prices, which I will discuss further below.

  • Fresh Graduates and Immigrants

Many people come straight out of college or university and have a tough time finding a job in they’re field. They are forced to take a full-time minimum wage job and that is just not enough. Say a person works a regular 9-5 work week for a year on minimum wage.  They make a mere $19,200 a year ($10X8X5X4X12). A minimum wage increase could potentially go a long way for these people though it may not be sustainable.

CONS:

  • Employers may cut jobs as they would have to spend more per employee

This is the biggest concern for people against minimum wage increases. The ideology here is that with a minimum wage increase, price of goods and inflation will subsequently rise as well. This is mostly true for smaller businesses as they may not be able to run their operations adequately without laying off an employee or raising prices.

  • Reduces purchasing power of people making more than minimum, ie the middle class

An increase in the minimum wage affects the middle class as prices generally rise and since the middle class did not receive the wage increase, they take the toll. The upper class are rarely ever effected. 

So to conclude, a minimum wage increase may not necessarily be a bad thing, however will it help poverty as a whole? Probably not. It seems like this age old debate will continue to be an age old debate until a complete economic overhaul is done. Point being, companies may decide to raise prices as people have more disposable income to spend. Rent and utilities expense would also increase as people can afford to spend more. Eventually, there’s a stalemate and a new minimum wage is introduced and the cycle repeats itself.. 

About these ads