A new Fraser Institute report has sparked a debate about the efficacy of what's called the 'living wage' — an in vogue policy goal touted by anti-poverty groups and labour unions.
Essentially, it is what it sounds like: a wage for the working poor that ensures one's basic living expenses such as food, clothing, shelter, transportation and childcare can be met.
The wage would vary depending on the cost-of-living in your region: In Vancouver, for example, left-leaning groups have pegged the living wage at $19.62/hour. (Incidentally, the minimum wage is British Columbia is $10.25/hour.)
[ Related: Should Canada raise the minimum wage? ]
In the United States, several municipalities have forged ahead with their own bylaws requiring contractors engaged by the City to pay their workers a living wage. According to the Fraser Institute, New Westminster, B.C. is the only municipality in Canada to do so.
The free-market oriented think-tank's Charles Lammam says that this is a foolhardy policy that can result in some unintended consequences.
"The best available evidence from the U.S. serves as a cautionary tale for us in Canada about adopting living wage laws," Lammam said in a press release accompanying the Fraser Institute report.
"When governments try to legislate wages, there’s typically a trade-off—while some workers may benefit from a higher wage, their gain comes at the expense of others who lose as a result of fewer employment opportunities.
"Employers respond to living wage laws by cutting back on jobs, hours and on-the-job training."
Lammam's research suggests that a 100 per cent increase in the living wage reduces employment — among low-wage workers — by between 12 and 17 per cent.
In other words, some individuals make more money, while a rather large percentage lose their jobs.
As you might imagine, the report hasn't gone over very well with left-leaning groups.
The analysts at PressProgress — the blogging website for the Broadbent Institute — dispute the Fraser Institute's findings.
[In Britain], "two-thirds of U.K. living wage employers report significant positive impacts on recruitment, retention and absenteeism," notes Broadbent Institute senior policy advisor Andrew Jackson in the Globe and Mail.
Jackson also notes that the "best economic evidence seems to show that modest minimum-wage increases have very limited macroeconomic impacts in terms of overall growth and employment. They can, however, have positive impacts for both workers and their employers in low-wage sectors of the economy."
You can be sure the free-market Fraser Institute is against increasing the minimum wage. But then again, the conservative think tank also says a couple in British Columbia with two children ages 10 and 12 can live on $25,377 annually.
Trish Hennessy, of the B.C.-based Living Wage for families campaign, suggests that the Fraser Institutes' slant doesn't take into account the business case for incorporating a living wage.
"In the United States...you've got President Obama talking about raising the federal minimum wage to $10.10 and you have a conversation not about what jobs that might affect in terms of dis-employment but you've got the economic policy institute saying that that could actually drive economic growth, she told CBC Radio.
"It could increase the GDP by about $32 billion.
"I think that if you're working for a living then you deserve to actually make a living wage."
What do you think?
Do you agree with Fraser Institute or do you believe that policy makers need to intervene to force employers to pay living wages?
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