February 15, 2000
Kamloops Daily News



When Labour Minister Joan Smallwood was in Kamloops
recently, she announced that the government of B.C. was
planing to increase the minimum wage.  While the
announcement was met with approval by those working in low
paying jobs, their joy was not shared by some of Kamloops'
business leaders.

The past chairman of the B.C. Chamber of Commerce, Al
McNair, said that  raising the minimum wage will harm our
economy.  The key to higher wages, he added, is a thriving
business community.  He was referring to the principle of
supply and demand as applied to labour.  When the economy
improves, more people are employed, which in turn,  creates
a shortage of labour. A shortage of labour drives up the
value of labour, and wages increase to attract workers from
that diminished pool.  But is this a classic example of the
supply and demand forces that drive a market economy? 

McNair didn't offer any examples of where increased
economic activity has a greater effect on wages than
increased minimum wages.  But there is a perfectly good
example right next door.  We can use it as a test case. 

Alberta has the lowest unemployment rate in the country and
its minimum wage is lower than B.C.'s:  $5.90, compared to
B.C.'s $7.15.  So, wages for low paid jobs should be greater
in Alberta.  But they are not --  28 per cent of Albertans
work in low paid jobs, compared to 19 per cent for B.C.,
according to a study done by Statistics Canada Labour Force
Survey, 1997.  For purposes of the survey, low pay was
defined as less than $9.24 (two-thirds of the 
Canadian median wage). 

 So, why doesn't the supply and demand theory of wages work
in this case?  Minimum wages set a standard for salaries
--they are used as a starting point.  Two opposite forces
are at work: a low starting wage keeps  wages low and a
shortage of workers tends to drive wages up.  In the case of
Alberta, the minimum wage has a greater effect than the
relative shortage of workers.  The forces affecting the cost
of widgets does not affect wages.

In fact, the minimum wage has a greater effect on wages than
worker shortage in all provinces, according to the same
study.  So does union membership.  In both Alberta and B.C.,
only about 6 per cent of unionized workers were in low
income jobs.  

Belief that market forces will solve social problems, such
as low pay, is naive.  While supply and demand is
unquestionably fundamental to the function of  markets, it
is not applicable to social problems, like child poverty,
national health and public education.  Yet, profit driven
business is often quoted as a solution to our problems. 

Market forces are very good at concentrating wealth. 
Canada's rich are getting rich and the poor are getting
poor. Only governments can redistribute wealth and help
smooth out disparities in health and education.  And while
the goal of government is not to make a profit, nor should
it be, governments run social agencies more efficiently than
business.  Government efficiencies are the result of the
scale of operation, and from the fact that senior
administrators are not collecting millions of dollars. 

I would have thought that the business community would be
pleased that B.C.'s working poor could now make a decent
living. The work ethic is something worth cultivating. 
Pride in work and the sense of self-sufficiency is something
that everyone understands.   

The working poor should be rewarded for their effort, rather
than punished through low working wages.  A decent minimum
wage is often the difference between making a living and
seeking  welfare.  If British Columbians are kept working,
they are contributing members to the economy, not dependents
on handouts from society. 

Minimum wages have not kept up with inflation.  Whereas
unions have been able to bargain higher wages, B.C.'s
working poor have not.  The result has been that they have
been driven to the brink of poverty and despair.  Since
business will not deliver higher wages, the government must
intervene.  Failure to do so will result in increased costs
for social assistance to all British Colombians.
 

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