Minimum wage as a catalyst

For as many well-intentioned people who argue for living wage laws, and/or guaranteed minimum income laws, there are as many others (hopefully also well-intentioned) who will call such efforts a menace.

For as many well-intentioned people who argue for living wage laws, and/or guaranteed minimum income laws, there are as many others (hopefully also well-intentioned) who will call such efforts a menace.

Recently, the Advocate ran a column from a commentator at the Fraser Institute, looking at a statistical analysis citing why a minimum wage that matches a minimally-acceptable standard of living is a bad idea.

The upshot is that when employers are required to pay substantially more than the current minimum wage, jobs disappear for untrained workers. Worse (if you can call earning more money worse), the people who benefit most from a proposed minimum wage of around $20 an hour are not the people on the absolute bottom of the income ladder, but those on the rungs just above the bottom.

Neither argument really works against such a proposal, but the Fraser Institute study was about statistics, not solutions.

If there was to be a job loss of 12 to 17 per cent of the lowest-paid positions in the workforce (as cited by the article), then who’s doing all that work? Management, I guess.

The Fraser Institute could also look at any number of studies showing how an improvement in the incomes of people on the second-bottom rung of the ladder improves productivity and outcomes for the economy as a whole.

By now we should all realize that the “trickle down” theory of income redistribution so beloved by the conservative right is a myth. Money in the economy does not trickle down, it flows up. The increasing wealth of the top income percentiles at the expense of the middle and the bottom is proof enough of that.

Rather, I’d like to present examples of how raising the bottom quartile of the income groups is not only ethically sound, but sound economics as well.

The Globe and Mail recently commented on a Swiss proposal for a national referendum on what they are calling a universal basic income (UBI). The article suggests even right-wing think tanks in the U.S. see merit in ensuring that no adult, employed or not, should live on less than about $3,000 a month.

This would involve more or less scrapping the bureaucrat-heavy welfare system, which would be a huge tax saving, and putting the dollars where they do the most good: into the hands of people who bolster basic consumer activity.

A common argument against a UBI (or, as it’s known in Canada, a guaranteed annual income) is that it rewards indolence. Worse, it enables the bad decisions of people who are destined to be poor, simply because they make bad decisions. Beer and cigarettes get mentioned a lot.

Here’s a couple of real-world examples to show that the poor are not as stupid or lazy as rich people think.

Let’s start with a small experiment that has been repeated often enough (even in Canada) to be considered reliable.

In 2009, a group selected 13 homeless men in London, England, some of whom had “slept rough” for 40 years and more. Forget the soup kitchens and temporary shelters that make up the traditional charity solution to homelessness.

Each of these guys was given about $4,500 in cash — no strings attached.

None of the participants blew their unearned cash on booze, drugs or gambling. One year later, 11 of the 13 still had their own roofs over their heads — some after a lifetime of having no real residence at all.

They got education and training, learned how to cook their own meals, got treatment for drug abuse. Some even got a passport.

After decades of well-intentioned charity supports, what got 11 of 13 vagrants off the street was the simple act of giving them cash and the freedom to spend it as they wished.

The cost of the experiment was about $75,000, including the salaries of the people running the program. Reporting on the experiment, The Economist opined: “The most efficient way to spend money on the homeless might be to give it to them.”

Here’s a larger example. Brazil’s Bolsa Familia (family allowance) turns 10 this year. It works there much the same way it used to work here when our own family was raising children. Mothers get a monthly cheque and they spend it.

The program costs about half a per cent of GDP. It is income-tested: only the poor receive it, although many recipients do have those minimum-wage jobs that the right-wingers love. And it comes with strings attached: the mothers must keep their children in school, and must prove they provide good nutrition for the children.

The Bolsa Familia is credited with reducing child mortality in Brazil by 73 per cent. What’s the savings to the economy in that, I wonder?

I have no credentials as either an economist nor as a statistician. But I do see the widening income gap in Canada as a bad thing. I also believe that the health of the economy as a whole is best ensured when the lowest income brackets have decent and reliable housing, nutrition, health care and education. If someone says it takes a minimum wage of $20 to get that, or a universal basic income, my start point is to accept the argument.

Greg Neiman is a retired Advocate editor. Follow his blog at readersadvocate.blogspot.ca or email greg.neiman.blog@gmail.com.

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