Students’ unions wrong on minimum wage

Federation of students campaign also a waste of student union fees

Students’ unions across Canada pour a great deal of financial resources — which it expropriates from the student body via mandatory student union fees — into political actions. One popular cause of the Canadian Federation of Students (CFS) is campaigns to increase the minimum wage. In 2013, the CFS-Ontario, which is composed of 38 students’ unions and more than 300,000 students, submitted a document to the province’s Minimum Wage Advisory Panel, in which it called for an immediate minimum wage hike to $14. Students’ union leaders met with organizers of a union- and activist-run campaign to raise the minimum wage, and donated $500 of students’ money to this campaign.

More recently, the students’ unions in British Columbia and Nova Scotia have been supporting similar campaigns in their own provinces to raise the minimum wage to $15. In British Columbia, the BC Federation of Labour’s “Fight for 15” campaign has been endorsed by the CFS-British Columbia. Meanwhile, the CFS-Nova Scotia has recently joined the Nova Scotia Living Wage Coalition, a group that consists of ACORN Nova Scotia, the Halifax-Dartmouth & District Labour Council, and Solidarity Halifax. The CFS-Nova Scotia also met with the Nova Scotia NDP several days ago to lobby for a minimum wage increase.

Students’ unions generally present two arguments in favour of a minimum wage hike. Firstly, it is argued that increasing the minimum wage will help ensure that students can pay for their tuition fees and living expenses, because many students work to put themselves through univer- sity. Secondly, students’ unions often claim that minimum wage hikes would help reduce poverty.

Unfortunately, students’ unions arguing for higher minimum wages completely ignore any behaviour changes that would result from a minimum wage hike. Increasing the cost of labour inputs results in higher prices for consumers and encourages businesses to substitute capital for labour. When the minimum wage exceeds the cost of automation or the workers’ capacity to add value, jobs are lost.

The Canadian Federation of Independent Business estimated in 2011 that even a 10% minimum wage hike across all Canadian provinces would result in between 92,300 and 321,300 job losses nationwide. Young people, who are much more likely to hold low-wage positions, would be disproportionately affected. In 2011, economists from the Fraser Institute looked at 14 academic studies on the impact of minimum wage hikes, and found that a 10% minimum wage increase “is likely to decrease employment by an average of three to six per cent for young workers (aged 15 to 24). For young workers most directly affected — those earning between the current minimum wage and the proposed higher wage — the impact is more acute, with employment losses of up to 20%.”

If a 10% minimum wage increase has such a significant impact on employment, it is easy to see that a $15 minimum wage — which represents a 46% increase in British Columbia and a 44% increase in Nova Scotia — would be very damaging to employment prospects, particularly for youth and students.

Furthermore, minimum wage increases are not likely to improve the standard of living for poor families. According to the Canadian Federation of Independent Business, “the vast majority of past studies find that minimum wage increases do not reduce poverty.” The reason for this is simple — most workers who do benefit from a minimum wage hike are not members of a poor household. Indeed, a paper published in the Canadian Public Policy journal in 2009, citing Statistics Canada’s data from 2004, found that only 17% of low-wage earners belong to poor households and that fewer than one-quarter of poor households contained a low-wage earner.

In conclusion, while increasing the minimum wage by upwards of 40% may sound appealing to left-leaning students who care about better-paying jobs for youth and poverty alleviation, the economic research suggests that neither of these goals can be accomplished through a minimum wage increase. Students’ unions should stop providing support — financial or otherwise — to campaigns to raise the minimum wage. Not only is it a waste of mandatory student union fees, it also makes it much harder for students to find employment and gain valuable work experience.