Against: Minimum Wage to $15

Jasper Lan, Michelle You, Daniela Li & Eric Schramm

 Executive Summary
GOAL

To discuss why drastically hiking minimum wage to a flat $15 hurts social welfare
KEY ADDRESSES

Wage increases are Society is affected by

$15 wage puts too much
actually passed onto redistribution of wealth &
pressure on businesses
consumers unemployment rate
RECOMMENDATION

Adjust each province to average earnings of worker over the span of next 2 years

Overview Issues Analysis Recommendation Implementation 2

 ISSUES
What is the current provincial mechanism to set
minimum wage?
Current Provincial Methodology
1
Lack of defined time limit

Reviews do not have to be

done within a certain time
frame
2
Lack of transparency

Only Saskatchewan and

Newfoundlands reports are Arbitrary Weighting
accessible online
No formal mechanism:
3 CPI?
Lack of accountability Trends in min. wage
rates?
Safe decision historically LICO?
has been to stay status quo Avrg. hourly wages?

Overview Issues Analysis Recommendation Implementation 4

Partners that are involved in decision-making process have
different motives & skin in the game
Final decision is ultimately politically motivated

Power to
Pressure influence Government
Groups decision

Best interest Establishes

of workers in reform
mind guidelines Review
committees

Overview Issues Analysis Recommendation Implementation 5

 ANALYSIS
What happens to businesses, people, and society
when minimum wage is increased to a flat $15?
How are businesses affected?

Driving Force
Drastic Hike in Wages
Puts pressure on businesses to
find short-term methods to
mitigate costs Outsourcing reduces job growth
Conditions for Increased labour cost incentivizes
scaling companies to look for cheaper
minimum wage labour options outside of Canada

Overview Issues Analysis Recommendation Implementation 7

 Small businesses are the most vulnerable to a wage increase

1 2 3

8.2 mil 37% 97%

SMALL RETAILERS

Canadians see serious threats to of all

employed by their ability to continue employers are
small operating under $15 small
businesses min. wage businesses

Redistribution of wealth: increasing minimum wage to $15 limits the ability of small businesses to operate

Sources: National Retail Federation & Statistics Canada

Overview Issues Analysis Recommendation Implementation 8

How are consumers affected?

Consumers bear the cost

Driving Force Working hours / jobs / benefits
Drastic Hike in Wages are cut or prices on goods /
Puts pressure on businesses to services are raised
find short-term methods to
mitigate costs Conditions for
scaling
minimum wage

Overview Issues Analysis Recommendation Implementation 9

Together:

Consumers bear the cost

Driving Force Working hours / jobs / benefits
Drastic Hike in Wages are cut or prices on goods /
Puts pressure on businesses to services are raised
find short-term methods to
mitigate costs Outsourcing reduces job growth
Conditions for Increased labour cost incentivizes
scaling companies to look for cheaper
minimum wage labour options outside of Canada

Because of great restraining forces, raising wages does not

necessarily increase total welfare from lower-income earners

Overview Issues Analysis Recommendation Implementation 10

Case Study: Passing on costs through price increases

1 5

Fast-Food Restaurants
2 4
Repeat
steps 2-3

Because of great restraining forces, raising wages does not

necessarily increase total welfare from lower-income earners
Prices Decrease Sales
3

Overview Issues Analysis Recommendation Implementation 11

Different regions will respond differently to a wage increase

Common Expenses
Vancouver $1,447 1-bedroom apartment in city centre $662
Moncton
$1.47mm Average detached home $178,200

$91 Monthly transit pass $62

$64 Monthly broadband internet $54
$65 Dinner for 2 $60
$3.12 Loaf of bread $2.60
$6 Pint of beer $5

$11.35 Minimum wage $11.00

Price of goods Same increase to

Moncton will show a more significant improvement of
already high = $15 = higher %
low elasticity overall living quality is this fair? increase

Sources: Heritage.org (Jobs & Labour)

Overview Issues Analysis Recommendation Implementation 12

Cost-benefit analysis: externalities to society
Society Case Study: Ripple Effects

Low-wage jobs are disappearing faster in

Companies
Seattle because the city has become too
Increase in # of more
expensive for poor workers to live, even with
closing small reluctant to
their new raises.
businesses hire
- Jacob Vigdor, Evans School
9mm lost jobs
(unemployment)

Increased
labour
outsourcing

Overview Issues Analysis Recommendation Implementation 13

Trickle-up effect? Jobs that are around $15/hour currently
Cosmetologist $13.84

Barber $14.01

Dietetic Technician $14.03

Substitute Teacher $14.25

Model $14.47

Proposed Min. Wage $15.00

Pharmacy Technician $15.23

Medical Assistant $15.34

Preschool Teacher $15.62

Phlebotomist $15.76

Vet Technician $16.00

EMT / Paramedic $17.04

Overview Issues Analysis Recommendation Implementation 14

 RECOMMENDATION
How should Canada set minimum wage moving forward?
Of the many opportunities considered, these 3 alternatives
stood out

A B C

Average
LICO (Low Living Wage
earnings of
Income Cut-Off) (indexed to CPI)
worker (50-60%)

Overview Issues Analysis Recommendation Implementation 16

Future policy considerations

Average earnings of
Alternative LICO Living Wage
worker

If an individual works full-time for

Household falls beneath LICO if Calculated based on actual cost
min. wage, earnings for that year
Definition they spend 54.3% of earnings on of living for family in specific
should at least be 50% of
food, shelter, and clothing community
provincial average

Accounts for inflation, but still fairly Ensures income is sufficient, but Employers appear to be highly
Description
arbitrary has not been updated since 1992 disadvantaged by this policy

Questions Which method is the best? What criteria is important in evaluating this?

Overview Issues Analysis Recommendation Implementation 17

In developing a recommendation, we considered key decision
criteria

1 2 3 4

Aligns with Vision Achieves triple Feasible within Long-term

& Values win constraints economic
development

Transparent

Purely Official
economic Decision

Overview Issues Analysis Recommendation Implementation 18

In developing a recommendation, we considered key decision
criteria
Filtering Criteria

Alignment with Economic

Feasibility
Vision & Values Stimulation

Self-sufficiency Financial Employment

Sustainability Operational Skills Development
Utilitarianism Time, Human Revenue Potential
Universal & Capital, Scalability
Reversible

Overview Issues Analysis Recommendation Implementation 19

Evaluating the options against criteria, we recommend
pursuing average earnings of worker
DECISION CRITERIA
Aligns with Triple Feasible within Economic
vision & values Win constraints Development

Average
earnings of
worker a a a a
ALTERNATIVES

LICO
(Bottom Range) a a x
Living Wage
(Top Range) a x a
Overview Issues Analysis Recommendation Implementation 20
IMPLEMENTATION
How should Canada execute the strategy?
Implementation timeline spans first 2 years to set up structure
2017 2018 2019
Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar Apr May

Coordinate with stakeholders

to plan proposal
Planning
Mobilize
resources to hire
and scale
Collaborate with government to
construct wage structure
Launch
Maintain current wage structure and iterate with live citizen
feedback

Roll-out social KPI tracking Ensure re-alignment with all 3

strategy stakeholder groups
Monitoring Current: N/A
Change in GDP & CPI
Effect on middle-tier wage roles Current: N/A

Overview Issues Analysis Recommendation Implementation 22

Thank you