Jobs should provide 'reasonable living,' says economist of P.E.I. wage hike

·3 min read
Jobs should provide 'reasonable living,' says economist of P.E.I. wage hike
A help wanted sign hangs in a window. Economist Lars Osberg says that when wages go up, more people start looking for work.  (Laura Meader/CBC - image credit)
A help wanted sign hangs in a window. Economist Lars Osberg says that when wages go up, more people start looking for work. (Laura Meader/CBC - image credit)

While some in P.E.I.'s small business community are concerned about the upcoming hike in minimum wage, one expert in the field says the increase is not likely to have an impact on employment.

Premier Dennis King announced earlier this month that P.E.I.'s minimum wage will go from $13 an hour to $13.70 on April 1, 2022.

"There are certain members in this province that, yes, it's going to be hard to find the additional 70 cents to pay, you know, in some cases, a substantial amount of workers," said Robert Godfrey, CEO of the Greater Charlottetown Area Chamber of Commerce.

Godfrey said he agrees workers need to be paid more, but he wants to see a "longer-term vision" from the government around future wage hikes.

He also pointed out that P.E.I. has the highest income-tax bracket model in Atlantic Canada.

"The government of Prince Edward Island also has a role to play when it comes to the income-tax bracket, when it comes to maybe subsidizing some of these wages through programs, getting people back to work," said Godfrey.

At $13 an hour, P.E.I. currently has the highest minimum wage in Atlantic Canada. It is nowhere close to a living wage, however, which is estimated at $19.30 an hour for someone living in Charlottetown, according to a 2020 report by the Canadian Centre for Policy Alternatives.

We have to start with the idea that the labour market should provide a reasonable living to people. — Economist Lars Osberg

"It's not just small businesses that have been suffering in the pandemic, but a lot of people lost their jobs and lost a lot of earnings during the pandemic," said Lars Osberg, economics professor at Dalhousie University, in an interview with host Louise Martin on CBC News: Compass.

"We have to start with the idea that the labour market should provide a reasonable living to people," said Osberg, who specializes in labour economics.

Steve Bruce/CBC
Steve Bruce/CBC

According to the market basket measure, a tool used to calculate low incomes, someone living in Charlottetown has to earn at least $44,000 per year to be above the poverty line.

A full-time worker earning the new minimum wage of $13.70 per hour would take home about $24,000 per year, Osberg said.

Osberg pointed to recent Nobel Prize laureate, Canadian economist David Card, whose research has shown that an increase in the minimum wage has little impact on employment.

"The modern literature on economics, it's pretty clear that you don't have to worry about a big employment impact," said Osberg.

"If the wages were better, you'd find more people looking for work. You'd also find firms who would be making a little bit more of an effort to increase their productivity to do more with less."

If the goal is to raise wages every year, then tell me what it is next year and the year after. — Robert Godfrey, Greater Charlottetown Area Chamber of Commerce

Godfrey said the chamber wasn't told in advance by the government about this boost in minimum wage, and that he'd like to be made aware of future increases.

"If the goal is to raise wages every year, then tell me what it is next year and the year after so that businesses can prepare," said Godfrey.

He said P.E.I.'s small businesses are getting ready for the raise the best they can.

"Going back into their budgets, readjusting … looking at how they can pull this together and pay their employees."

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