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On Minimum Wage, Progressive Conservatives Miss the Mark

(via CBS News)

Concerning the Ontarian minimum wage, the lesser of two bad ideas is still a bad idea.

Less than four months from a pivotal election, disrupted by political turmoil, the Progressive Conservatives have attempted to leverage their opposition to an increasingly unpopular incumbent. Their People’s Guarantee promises common sense change — for many, a refreshing alternative to tired Liberal policy. But buried in the fine print of the PC platform lies a questionable policy position: a change to the Liberal minimum wage plan, which seems much more like a watered-down imitation than a conservative alternative.

Like the Liberal Party, the Progressive Conservatives would raise the minimum wage to $15. But to do so in one year would be “too fast” and “too soon,” according to their platform — so they would do it over four. The unstated assumption here is that timing, not the artificial wage floor itself, is the sole reason the Liberal policy would cost Ontarians their jobs. To this end, the PC stance rests on a tenuous economic foundation, bending to misguided popular perception at the expense of principles.

From the Bank of Canada’s job loss and inflation estimates to Tim Hortons’ benefit cuts and price hikes, there has been no shortage of evidence against the Liberals’ new minimum wage. The short-run economic impacts of a 21% wage increase were as predictable as the partisan responses thereto. Still, the PC Party, handed powerful evidence against a minimum wage increase of any kind, has restrained its criticism and condemned the rashness, not ignorance, of Liberal incumbents.

How reasonable is it, though, for Progressive Conservatives to support a drawn-out wage hike? From a strictly economic standpoint, it is largely baseless.

In the long-run, real wages (workers’ income adjusted for cost of living) are determined by labour productivity (output per hour worked). In other words, the only way in which to improve the living standards of unskilled workers is to boost some determinant of their productivity. Thus, if businesses are forced to pay workers more without concomitant increases in productivity, they will simply cut costs or raise prices. Neither of these responses will improve real wages in the short-run or long-run, yet the Progressive Conservatives insist that slowing the implementation of a wage hike will end differently.

Some economists, attempting to justify a minimum wage increase, contend that the restrictive cost burden will force businesses to be more efficient, thereby boosting productivity. But the kinds of firms affected by the minimum wage — those already operating on tight margins after being shaken by the 2018 increase — would have little to gain in the way of cost efficiency. Rather, another increase would likely prompt more cuts to jobs and hours, more price increases, and more investment in technologies that replace unskilled workers, even if it is spread over four years.

Admittedly, by spreading the wage increases over time, the Progressive Conservative plan would see some of the harmful consequences offset by the regular increases in worker productivity. Nonetheless, it is hardly a ‘common sense alternative’ to implement a negative policy in a slightly less negative way. The PC Party should stick to its fundamentals: pro-business policies that improve worker training and education, deepen capital investment, and encourage innovation. All of these are conducive to real wage increases; none require government intervention that hurts businesses.

As the Progressive Conservatives attempt to dethrone a 14-year regime, it is understandably pragmatic to play it as safe as possible. Indeed, from a political standpoint, towing the line with moderates on several issues may very well be necessary to defeat the opposition. Still, building a grassroots image does not always mean sacrificing core ideas for political expediency.

The Progressive Conservative Party is the only legitimate choice for Ontarians who believe in the power of fiscal conservatism — the only alternative to harmful interventionism. Their policies should reflect that. While many long for a PC victory in 2018, supporters should always bear in mind the long-term welfare of the province. It is critical that party leaders are held accountable, and in the case of the minimum wage, while the PC plan may be preferable, it is by no means a panacea.

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