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The Ontario Minimum Wage Cracks the $10 Barrier Today (and a Joke!)

The Ontario general minimum wage goes up to $10.25 today!   In case you are wondering where to find that law, you need to search a bit.  The ESA says only that employers must pay the ‘prescribed’ minimum wage.   When you see the word ‘prescribed’, it tells you to go digging for a Regulation.  If you do that, eventually you may stumble upon a regulation with the very sexy name,  Regulation 285/01.   Section 5(1.3) of that Regulation provides the following:

(1.3)  From March 31, 2010 onwards, the prescribed minimum wage is as follows:

1. For an employee who is a student under 18 years of age, if the weekly hours of the student are not in excess of 28 hours or if the student is employed during a school holiday, $9.60 an hour.

2. For an employee who, as a regular part of his or her employment, serves liquor directly to customers, guests, members or patrons in premises for which a licence or permit has been issued under the Liquor Licence Act, $8.90 an hour.

3. For the services of a hunting or fishing guide, $51.25 for less than five consecutive hours in a day and $102.50 for five or more hours in a day whether or not the hours are consecutive.

4. For an employee who is a homeworker, 110 per cent of the amount set out in paragraph 5.

5. For any other employee, $10.25 an hour.

Of course, every time a government raises the minimum wage, the age old debates amongst economists on the utility of legislating a wage floor rise to the surface.  There’s a good story starring two leading protagonists in the debates over minimum wage laws in the Star, economists Morley Gunderson (the ‘con’ argument) of the University of Toronto and Bruce Kauffman (the ‘pro’ argument) of Georgia State University.  Gunderson believes the minimum wage reduces employment for teenagers and has little impact ultimately on poverty.  Here is Professor Gunderson’s submission to the provincial government, which was largely ignored by the McGuinty government.

The Godfathers of the neo-liberal Law and Economics school–Richard Posner, Richard Epstein, and Gary Becker–also oppose minimum wage legislation for reasons similar to Gunderson’s.  For example, in this Blog entry by Richard Posner, he argues that a minimum wage does little to address poverty, and that progressive taxation would be more effective. Milton Friedman makes the same argument in this video clip.

Kauffman, and a bunch of other economists, argues that the minimum wage has other benefits for the economy that outweigh any negative impacts to small segments of the workforce. Despite the arguments of the Gundersons and Posners of the world, minimum wages are very common in the advanced economic world, and no government in Canada I am aware of has seriously proposed abolishing it.   In Britain, where historically the government has been less interventionist in the labour market than many other countries, a minimum wage was introduced only in 1999.  Conservative politicians and the business lobby argued then that the legislation would lead to mass unemployment, but as this 2005 article in the British Observer notes, in practice, these dire predictions did not come to pass.

As is often the case, the economic studies are inconclusive, and the results are influenced by whatever set of assumptions the economist elects to adopt.

What’s the old joke about economists?

How many economists does it take to change a lightbulb?

Two.  One to assume that there is a ladder, and one to change the lightbulb.

None.  Just assume that the lightbulb works.

Eight.  One to change the lightbulb, and seven to hold everything else constant.

None.  The market will do it…

I could on and on …


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