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The Progressive Economics Forum

Flogging a Dead Horse: The CFIB on Minimum Wage

The CFIB hav  a new study out attacking minimum wages

Their estimate of job losses from a 10% increase in minimum wages is based on elasticities from studies which found significant negative impacts on employment and discounts the many studies which have found very small impacts. The OECD – which is more impartial – has found the effect of minimum wage increases on adult employment to be very small. Moreover, they have found that minimum wage increases reduce the gap between lower and middle income workers, promoting greater equality.

Studies which point to job losses from minimum wage increases ignore the fact that minimum wage increases can be positive for low wage workers even if there is a small reduction in total hours of work. For example, if a $1 increase in a minimum wage of $10 an hour did result in a cut in weekly hours from 35 to 33, the minimum wage worker would still be $13 better off at the end of the week. (33 hours at $11 per hour=$363 vs 35 hours at $10 per hour =$350.)

Other studies have found that there are positive effects of higher minimum wages on productivity. Higher wages reduce turnover and thus training costs, and probably promote greater employer investment in capital and in skills.

(I find that there is now a wealth of good material on positive impacts of minimum wage increases in the archive of this blog for anyone interested in more.)

Enjoy and share:

Comments

Comment from charlie
Time: February 10, 2011, 10:52 am

I really don’t understand the CFIB. They are suposed to represent small business and small business needs people to go to their shops etc and buy . Yet they do not get the idea that people will and can only do that if they have the money or expect to have the money. And they don’t have the money. Wages , particularly at the lower end of the scale have not kept pace with inflation for the last thirty years. Debt is growing and growing.
And the CFIB and their political brethen like the Ford brothers here in Toronto are doing all they can to attack unionzed workers and thus put more pressure on wages.
And inequality in incomes grows and grows. Are they that short sighted……

Comment from Sixth Estate
Time: February 10, 2011, 11:29 am

Charlie, It’s a large collective action problem. They definitely see the necessity of having an affluent population to purchase goods. But from an individual business’s perspective, it’s much better not to pay workers more (and hope that your consumers have bosses who aren’t so stingy).

CFIB, naturally, caters to what its members, the employers, want to hear. This article could be summarized as: “Employers oppose wage increases.”

Comment from Paul tulloch
Time: February 10, 2011, 12:01 pm

6th estate, good point, makes me realize, given a cross section of the ideology that the Cfib espouses, that if the small business crowd ran the economy, what a desperate state it would be. Their view on minimum wage is a classic free rider problem. Of course this is not to glorify big business, as they too have historically been guilty of such lobbying. Remuneration, arrgh it is the heart of what is wrong, globally.

A good lot of humans quality of life are determined by such seemingly arbitrarily set policies, and to see such discourse built up by such an armed force against those making the least in society, is rather pathetically revealing morally.

Comment from Mark Francis
Time: February 10, 2011, 7:01 pm

With modern macroeconomics calling full employment a bad thing, minimum wages become even more important as non-union workers have even less bargaining power in the face of constant unemployment mandated by government policy.

I’m a libertarian, but I support minimum wage until someone figures out something that works better than monetarism.

Comment from Sixth Estate
Time: February 10, 2011, 8:30 pm

Having now skimmed the study, I can honestly say there are some much more bizarre ideas in there than the usual refrain about rising unemployment. For instance, one of their suggestions is that government should always reduce corporate tax rates by an amount equivalent to any legislated increase in the minimum wage, and should be barred from increasing minimum wages even enough to keep pace with inflation.

A self-serving report from a business lobby group, in other words.

Comment from Glen
Time: February 11, 2011, 12:24 pm

The CFIB does a lot of good work. On this subject though they have not.

Many of the studies on minimum wage were done at a time when such wage earners might be competing with others with similar costs of living. Nowadays due to globalization, I believe that anyone would be hard pressed to find a minimum wage job that was precarious based on wages. The cost sensitive ones have long ago been transferred offshore.

It should also be noted that governments can be hypocritical when it come to minimum wage. I suggest that the basic minimum personal exemption for taxes should be set at a rate that is equivalent full time employment on minimum wage.

Comment from Sixth Estate
Time: February 11, 2011, 12:47 pm

Glen, the CFIB report actually does suggest that.

Of course, they imply it’s an either-or thing, but there would be no particular reason why we couldn’t simultaneously raise the minimum wage and the Basic Personal Amount.

Comment from Glen
Time: February 11, 2011, 3:15 pm

Sixth Estate, what I am suggesting is that the two are linked. I agree that both should be raised but that the BPA is farther from being equitable than the MW.

Comment from ben burd
Time: February 13, 2011, 5:43 am

In one paart of the study it was mentioned that the number of minimum wage earners is measured yearly by Statscan, if that is the fact why does the CFIB ESTIMATE the jobs to be lost. Surely one could look at the yearly rate and discount the increase by the amount of growth in that year?

Comment from Paul tulloch
Time: February 13, 2011, 8:44 am

@glen, I have yet to read a study by the Cfib that is not charged with politically beaten numbers. Every study done by that org is twisting up the numbers the way the Cfib wants to make it’s point on. Not an ounce of unbiased research has ever come from that place. They are the worst abusers of numbers I have witnessed. In fact I have a very difficult time labeling their research departments output as ‘studies’.

Truly they are a loud propaganda machine for small business, and stronger than most unions, but do you ever hear of small business bashing?

Comment from andrew jackson
Time: February 13, 2011, 9:05 am

Just to note that the hypothetical hours reduction cited in my post is more than the one that would result from use of the CFIB elasticities. Also, on close reading they admit that the “job loss” could be the result of slower employment growth and not actual hours reductions. Thus I reiterate my point that minimum wage increases are good for low wage workers.

Comment from Paul Tulloch
Time: February 13, 2011, 11:16 am

follow up comment-

first critique of this paper- they slice and dice the minimum wage earners by a few different control variables, YET the DO NOT profile the gender dimension!?

I wonder why?

Well because it would not be nice to reframe the issue as an issue that disproportionately effects women as then the whole attack on minimum wage earners, would not go down the public throat as easy.

I have yet to look at the split on gender, but my guess is at least 60% are women and more importantly I bet if the stat is available predominantly recent immigrants.

So again that stat is not mentioned.

How can slice and dice the numbers up, call your study reframing and not mention women or recent immigrants??????

Blows me away that nobody on this list commented on that.

Well, if you

Comment from Paul Tulloch
Time: February 13, 2011, 12:16 pm

http://www.peri.umass.edu/fileadmin/pdf/published_study/PERI_MW_EITC_Oct2010.pdf

I meant to add this link to a pretty decent study of the minimum wage issue in the US and an interesting tax measure to help minimum wage workers meet a living wage threshold.

Comment from Iglika Ivanova
Time: February 17, 2011, 3:13 pm

Thanks for bringing this up here, Andrew. An article in the Vancouver local paper about the CFIB study inspired me to write this blog post on the Policy Note Blog:

http://www.policynote.ca/raising-the-minimum-wage-not-if-but-how-much-and-how-fast/

I’m happy to report that at least one Vancouver Sun columnist found my arguments more convincing than CFIB’s:

http://www.vancouversun.com/business/Minimum+wage+increase+longer+much/4284459/story.html

Comment from John Benson
Time: November 6, 2012, 3:08 pm

Although I haven’t had the time to readall of the comments (which means the author may have elaborated on this) his example of a worker being 13$ better off actually totally ignores that the government taxes this “benefit.” What’s more, if the government truly wanted to put more money in these people’s pockets they would stop taxing them so high in the first place. What exactly is your reasoning for suggesting someone working the counter in a burger shack ought to be earning closer to what a skilled/educated worker does?

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