I found this comment interesting. I wonder how many small business owners share his opinion on min. wage. The idea looks good on paper but…
Jim Sinclair, president of the B.C. Federation of Labour, dismissed the argument that raising the minimum wage will result in job cuts.
“I don’t believe they have extra people hanging around now because they like them,” Sinclair said. “They’re not going to cut jobs as a result of going from $8 an hour to $10.25 over a year. Good wages actually help them, because the last time I looked, people with money in their pockets spend that money in small businesses. The truth is, $20 an hour would make small businesses flourish in this province.
Except the 25% increase in the cost of low-end labour means employers will be more picky hiring.
And using Rupert’s Extra Food controversy - minimum wage will be higher than the $9.00 entry wage in that union. Shit will hit the fan at contract time.
of course he would say that that way the union can go the low end ppl got a 22% wage increase where is our 22% wage increase, it isn’t about minimum wage going up the unions will only use that to get their high wages go up even higher
Wow, interesting perspective. Doesn’t a higher minimum wage help everyone? Unions help raise the standards for all workers, and this is long overdue.
I find it so disappointing when people would rather drag others down instead of helping themselves and each other up.
An increase to minimum wage has to be looked at over 3 economic periods; short term, medium term, and long term.
In the short term an increase to the minimum wage has a no “real” negative effect. People (employees and consumers) are are generally happy, there is more money in their pockets, therefore having a greater disposable income, which in turn leads to a higher level of consumption. Your nominal wage and you real wage are currently equal…Great!
In the medium term firms start to notice that the increase in wages is beginning to effect their bottom line, so they begin to increase their markup, in order to retain or increase their profit margins. As well, firms will begin to automate in order to keep costs down, which means unemployment for some…or many. Your nominal wage has increased, but your real wage has just decreased…Not so Great!
In the long run the increase in minimum wage will see a high decrease in in employment for the “least skilled” workers, thus dramatically increasing the unemployment rate in youth, and ethnic workers. When unemployment rates are high the government is generally forced to increase unemployment benefits, which will only aggravate the situation more by having a correlational effect increasing the natural rate of unemployment. After a long period of time, the high level of unemployed workers will have to accept this lower real wage, therefore decreasing the natural rate of unemployment.
From an economical point of view, is this short term gain really worth the long term effects?
[quote=“siriusly”]An increase to minimum wage has to be looked at over 3 economic periods; short term, medium term, and long term.
In the short term an increase to the minimum wage has a no “real” negative effect. People (employees and consumers) are are generally happy, there is more money in their pockets, therefore having a greater disposable income, which in turn leads to a higher level of consumption. Your nominal wage and you real wage are currently equal…Great!
In the medium term firms start to notice that the increase in wages is beginning to effect their bottom line, so they begin to increase their markup, in order to retain or increase their profit margins. As well, firms will begin to automate in order to keep costs down, which means unemployment for some…or many. Your nominal wage has increased, but your real wage has just decreased…Not so Great!
In the long run the increase in minimum wage will see a high decrease in in employment for the “least skilled” workers, thus dramatically increasing the unemployment rate in youth, and ethnic workers. When unemployment rates are high the government is generally forced to increase unemployment benefits, which will only aggravate the situation more by having a correlational effect increasing the natural rate of unemployment. After a long period of time, the high level of unemployed workers will have to accept this lower real wage, therefore decreasing the natural rate of unemployment.
From an economical point of view, is this short term gain really worth the long term effects?[/quote]
I don’t think that demand for goods and services offered by low wage employers is quite so elastic as you suggest. After Newfoundland & Labrador further increased its minimum wage to $10/hr last July the unemployment rate declined from 15.3% to 13.6% in six months. cupwire.ca/articles/41140 NL has the third highest minimum wage in the country, while “The Best Place on Earth” takes last place.
it’s simple most small business’s their labour costs are about 30%, so the minimum goes up 22% and the other employess would want the same raise, so the small business prices would have to go up about 6.6% to account for the extra labour costs, and that is assuming their suppliers don’t increase their costs as well for their wages going up, as for Sinclair his comments about the minimum wage increase hurting small business’s was out of line, he basically said if they can’t afford it they shouldn’t be in business, that is the jest of his comments, that from someone who never owned a business and probably never worked that much at a job other then being head of his union. He should quit his high paying union leadership job and go to work at one of those small business’s in Vancouver, i’m sure the ppl putting in 80 hrs or so just to make a meager living at their business would welcome him and show him what a small business is actually like
That part is simple, but the question is whether unemployment increases if the the cost of the wage increase is passed on to the customer. The assumption seems to be that if prices go up because of a higher minimum wage, sales will necessarily go down and unemployment will rise.
For some goods or services a price increase will reduce demand for the product (demand is elastic). Customers shop around looking for cheaper products or substitutes, or defer or avoid purchases. Sales decline and the business may have to lay people off or even close down.
But for other goods or services a price increase will make little or no difference (demand is inelastic). Do people stop getting haircuts and are barbers laid off if the price goes up 6.6%? Highly unlikely.
Or more pertinent, do people stop going out for coffee and stay at home to drink more tap water if the price of a double-double goes up 6.6%, in three increases spread over a year? I doubt it. People don’t change their lifestyles that easily.
I’m not a fan of Sinclair by the way. I prefer Samuelson.