Raising the basic personal amount and reducing the rate for lower-income earners would be a place to start
With Alberta this month officially having the lowest minimum wage (tied with Saskatchewan) in the country, there is now a great clamour that something be done to address the situation.
Of course, Alberta did not lower its minimum wage and it’s not entirely clear what relevance the minimum wage in other provinces is for us here. For that matter, it’s not even clear what the objective of this exercise is, other than some vague notion that our rate should not be the lowest. Does it stand to reason that if other provinces hadn’t raised their minimum wage, that the case for an increase here would be weaker? That seems illogical.
Before we rush to fix the problem, it would be helpful to first establish what the problem is that we’re trying to fix.
Yes, the cost of living has increased and, yes, the minimum wage has remained at $15 an hour since 2018. However, Alberta had a reasonable formula for implementing minimum wage increases that was linked directly to the rate of inflation. If the previous NDP government had merely stuck with that formula, we’d be roughly where we are now in terms of minimum wage.
However, the cost of living does vary across the province and even across the country. For example, the minimum wage in Ontario is now $17.20 an hour. But the average house costs are roughly double in Toronto what it costs in Calgary. The average monthly rent in Edmonton is half of what it is in Toronto. Should it then follow that Alberta’s minimum wage should be half of what it is in Ontario? Of course not.
For one thing, the largest cohort earning minimum wage are those between the ages of 15 and 19. Not surprisingly, they were the hardest hit in terms of job losses when the NDP rushed through a substantial increase to the minimum wage. This is not where poverty reduction strategies need to be targeted.
One of the interesting findings of Alberta’s expert panel was the effect on low-income workers just above the minimum wage. This is known as “wage compression,” which means that those earning just above minimum wage did not benefit from the increases. If we’re to accept that a so-called “living wage” far exceeds the minimum wage, then our focus should be elsewhere.
Indeed, as the University of Toronto’s Morley Gunderson found in a 2021 study, very few minimum wage earners are in households that fall below the poverty line. Therefore, much of the gains from minimum wage increases “spill over” to non-poor households.
When asked last week about the future of minimum wage in Alberta, Jobs, Economy and Trade Minister Matt Jones noted that “our province has the lowest provincial income tax rates, the highest personal income tax exemption levels and no provincial sales tax.”
Raising the basic personal amount and reducing the rate for lower-income earners would be a place to start. If we want a more targeted approach to poverty, we could look at expanding tax credits such as the Alberta Child and Family Benefit and other supports.
We can and should restore a formula for future minimum wage increases, but it should not be the primary focus of efforts to address poverty in Alberta.
Afternoons with Rob Breakenridge airs weekdays from 12:30 to 3 p.m. on QR Calgary Radio