Two-tiered minimum wage will squeeze more from workers

Currently New Brunswick is debating the notion of a two-tiered minimum wage wherein workers earning tips will receive a lower hourly rate of pay than other workers. The NB Media Co-op interviewed Jason Edwards, a Halifax-based researcher with the Canadian Centre for Policy Alternatives,  on his analysis of minimum wages in Canada, what stimulates their growth/reduction and the function they perform.

Chris Walker: The food service industry is pushing for a two-tiered minimum wage  for obvious reasons. How do you respond to the economic argument that this reform will make New Brunswick more “competitive” and it will reduce unemployment by spurring investment and economic growth?

Jason Edwards: There are two reasons that these claims should be challenged.  The first is that there is no conclusive evidence linking minimum wage increases to unemployment.  More accurately, unemployment follows the ebb and flow of the overall economy.  Generally, increasing the minimum wage results in more total wages paid to lower income earners, which is, in my view, a good thing.  Second, regarding “competitiveness,” it is important that we not allow the interests of a particular group of individuals to become synonymous with the interests of society in general.  While paying poverty-level wages may put a few hundred extra dollars in the pockets of business owners every month, it also has a seriously detrimental impact on the lives of working families.  The thousands of hard-working New Brunswickers who  barely make it on low wages are too often forgotten in public conversation that confuses being competitive with having the most expendable workforce.

CW: You say there is no “conclusive evidence linking minimum wage increases to unemployment.” That position contradicts the rationalizations behind official policy. Last June New Brunswick lost 1,900 jobs, pushing unemployment up to 9.6%. The decision was made to hold off on raising the minimum wage in order to prevent unemployment from getting worse. How do explain this?   

JE: Arguments like this speak volumes to the class dynamic of the minimum wage.  We have two competing groups with competing interests.  One group, the owners of capital, has a distinct advantage over the other. For one, it can afford expensive lobbyists.  We’re all familiar with the work of the Canadian Federation of Independent Business (CFIB) and the Canadian Restaurant and Foodservices Association, which have lobbied endlessly to keep wages down.  What’s worse is that the owners of capital can, at their leisure, invoke the spectre of job losses without any tangible supporting evidence.  Of course CFIB members will answer “yes” when asked if minimum wage increases could result in job losses; they know it is in their best interest to promote the idea that, as New Brunswickers, we have to decide between poverty-level wages and unemployment.  Unfortunately, low-wage employees possess no equivalent mechanism for swaying the opinions of public officials.  Instead, they must rely on their own hard work, the few academic studies that are produced, and the wherewithal and natural empathy of the voting public to represent them.

CW: When the Atlantic Institute for Market Studies (AIMS) releases a report on minimum wage which argues that a 10 per cent increase in the minimum wage reduces the employment of youth and teens by roughly three to six per cent, how would you respond to this claim?   

JE: AIMS is a perfect example of the social asymmetry that exists between the ownership class and the working class.  A quick glance at their list of donors—mostly big business, banks, and other groups of concentrated capital—makes their political bias quite clear.  They work without pause toward justifying and reinforcing the position of moneyed elites.  A study like the one you mentioned should be considered dubious, at best, by a critical thinker because the conclusion is predetermined: it must reinforce capital’s position that working people need to accept low wages or suffer the consequences.  Research by more serious economists, whose premises and conclusions do not rely on the interests of their benefactors, more often argue that modest minimum wage gains do not reduce employment, and any unemployment effect they may caused is offset by increases in the overall wage-bill.

CW: According to Statistics Canada the proportion of New Brunswick workers employed in low wage jobs has increased from 22.3% in 1993 to 27.5% in 2004. According to economists at the Canadian Union of Public Employees (CUPE), when adjusted for inflation “the real value of the minimum wage is still far below what it was 30 years ago in every single province in Canada.” If it is empirically true that as time goes on a greater proportion of Canadians are working for lower wages, what could account for this trend?

JE: The staggering statistics regarding low-wage employment in the Maritimes are not new, but are only now gaining notoriety.  The Atlantic Provinces Economic Council recently released a report concluding that in Atlantic Canada’s past ten years, the number of high-wage jobs created was dwarfed by the number of low-wage jobs created by a rate of four to one.  Distilling these trends into precise cause-and-effect relationships is difficult.  In general, after significant wage-increases over the forties, fifties and sixties, wages began to stagnate in the mid-seventies.  Capital started to take full advantage of mechanization and trade liberalization not only as a tool to increase productivity, but also as a weapon wielded against labour.  The value of labour has subsequently been reduced and leveraged against itself around the world.  Unfettered capitalism has come into an age of complete domination where, because we have no apparent alternative, the interests of the ownership class are seen as the general interest.  What I find most stunning is the data available on productivity gains and wage-versus-profit shares.  While capital continues to become more productive, less and less revenue is allocated to workers while more and more goes to profit.  We’re not getting poorer because the pie is shrinking; we’re getting poorer because certain people are taking more of it for themselves.  The shrinking minimum wage has encouraged this trend by contributing to the political climate that makes poverty-level wages appear rational and sustainable.

CW: In light of everything we have discussed, if you worked for minimum wage in a restaurant, what would you do to make your voice heard?   

JE: This is a difficult matter to address.  On the one hand, working people are at the mercy of the ownership class; any lost wages due to losing a job or having reduced hours can mean the difference between getting by or not.  On the other, poverty-level wages are not sustainable and working people can leverage their shared experience against exploitation.  In the low-wage jobs that I have worked, I have tried to build solidarity between my working colleagues.  That means griping to one-another about things we dislike and things we would change.  Ultimately, the goal is to build enough solidarity that we can bargain collectively so as to gain an equal footing with the employer, who can otherwise leverage us against one another.  Only when working people begin to see themselves as a cohesive class with shared experiences and aspirations will the political culture of stagnating wages and dwindling prospects be laid to rest.

Jason Edwards holds a Masters in political science from the University of New Brunswick and contributes to the blogs, behindthenumbers.ca and maritimeperspective.ca.