By Patrick Webber
On April 1, 2017, New Brunswick’s minimum wage increased by 35 cents to $11/hour, the 12th increase since the beginning of 2007. As elsewhere in North America, there is debate in New Brunswick about whether these increases are too much, putting financial stress on small businesses in particular and discouraging hiring, while some political parties and advocacy groups in the province call for a $15/hour minimum wage. In this debate, it is worth noting that in real terms, New Brunswick’s minimum wage is the highest its been in a quarter-century.
When one examines the minimum wage rate in New Brunswick between 1992 and 2017, and adjusts the rate to 2016 dollars (based on the New Brunswick Consumer Price Index), we see that minimum wage was relatively stable throughout the 1990s and early 2000s, hovering between $7.35 and $7.97 per hour, in 2016 dollars, between 1992 and 2006. The minimum wage then experienced a notable increase in the latter half of the 2000s and early 2010s, and has remained roughly stable since 2012. The rate increases of the previous decade have been such that in real terms New Brunswick’s minimum wage is now over 41 percent higher than it was in 1992 and nearly 29 percent higher than it was in 2007.
It is evident that the minimum wage in New Brunswick is more than keeping pace with inflation and is more substantial in real terms than it was just over a decade ago. Huge jumps in the rate, for instance to $15/hour, would risk employers no longer being able to afford current staff or deter employers from hiring new staff. This would particularly impact low-skilled and entry-level jobs, further hindering the entry of young people into the labour force.
The solution to concerns about the cost of living for low-income earners should instead be to lower the cost of living rather than artificially raising wages. Lower payroll taxes and the removal of trade barriers that artificially raise the price of goods could help. Working Income Tax Credits can also add to low-income wages without burdening employers.
The answer is not to price low-skill or entry-level workers out of the marketplace, which is what a large minimum wage would do, but rather to increase the purchasing power of the wage that people actually earn.
SOURCES: Statistics Canada, CANSIM tables 326-0021 and 326-0020; Government of Canada Minimum Wage Database.