Congratulations Matthew Lau!!!
1st Place, $1000 Prize Winner
of the AIMSonCampus 2015 Essay Contest
This year’s essay contest brought many creative submissions analyzing the deepest issues affecting Atlantic Canada. Students were asked to write both a policy report and an op-ed on any issues they felt could “right the sinking ship” that is our region. Enter Matthew Lau.
Matthew, a finance and economics student at the University of Toronto, wrote this year’s best two essays as judged by a blind panel of AIMS research staff. And he won deservedly. Not only do his essays demonstrate a deep understanding of the case for free markets and limited government. They also show incredible range. In one essay, he deals with the crisis of provincial debt loads, exacerbated by a bloated and over-compensated public service. And in his other essay, posted below, he deals with a totally distinct — but equally alarming — topic: the recent calls for a $15 minimum wage. This is a meme that began in Seattle, Washington, trickled down to LA County, and has finally found its way into Canada with the election of Alberta’s NDP government. As a policy analyst would, Matthew recognized that in the battle of ideas, the best ideas don’t win all on their own. Indeed, bad ideas win all the time, and a $15 minimum wage is the mother-load of bad ideas. As such, Matthew shouts it from the roof-tops, drawing special attention to the harm caused to young workers looking for employment. Hear hear, and bravo on the job well done.
Recently elected Alberta Premier Rachel Notley’s vow to follow through on campaign promises to raise Alberta’s minimum wage to $15, combined with the surge in the polls of the federal NDP – which has promised to implement a national $15 minimum wage if elected this fall – is sure to bring optimism to student unions in Nova Scotia who themselves are lobbying for a minimum wage increase.
In February, the Canadian Federation of Students–Nova Scotia met with the Nova Scotia NDP caucus to lobby for a $15 minimum wage, which represents an increase of more than 40%.
Such a policy would undoubtedly be disastrous for the approximately 55,000 students enrolled in postsecondary institutions in Nova Scotia. According to a paper published in 2008 by the Atlantic Institute for Market Studies and authored by Morley Gunderson, an economics professor at the University of Toronto and the CIBC Chair in Youth Employment, “Canadian evidence shows that a 10 percent increase in the minimum wages reduces the employment of teens by 3 to 6 percent and slightly less for young adults.” Economists from the Fraser Institute note that for young workers making less than the proposed increased wage, the job losses would be as high as 20%.
Not only would jobs for youth disappear, but training opportunities would as well. According to the Fraser Institute, employers are more reluctant to train young workers when the minimum wage increases. “A recent study found that the proportion of young workers receiving formal training fell by up to two percentage points for every 10% increase in the minimum wage,” wrote Fraser Institute economists Niels Veldhuis and Amela Karabegovic in a 2011 National Post op-ed.
Fewer jobs and training opportunities aren’t the only ways youth are adversely affected by minimum wage increases. According to a paper published in the Journal of Economic Surveys in 2008 and cited by the Canadian Federation of Independent Business’s “Minimum Wage: Reframing the debate” study in 2011, a 10% minimum wage increase in the United States causes prices to rise by up to 4%. This is bad news, especially for students who constantly seek out ways to save money.
If a mere 10% increase the minimum wage has such detrimental effects on youth employment, training opportunities, and prices, it is clear that an increase of more than 40% would be devastating for youth.
Even worse, a minimum wage hike fails to achieve its intended goal of helping poor workers. “Academic studies consistently find that minimum wage increases do not reduce poverty,” noted Fraser Institute economists in a Vancouver Sun column last year. “At best, Canadian researchers find no statistically significant effect. At worse, they find minimum wage increases can actually increase relative poverty.”
While a large minimum wage increase may appeal to young and idealistic students, they need to examine the economic evidence before devoting resources to lobby for policies that would be damaging to students. Last year, the youth unemployment rate in Nova Scotia was 17.8%, more than four percentage points higher than the national average. In fact, the youth unemployment rate in Nova Scotia has exceeded the national average in every year since before 1990. A massive minimum wage hike would only ensure the continuation of this trend.
By Matthew Lau
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