The building back of our economy after Covid 19 brings many economic questions including whether Nova Scotia’s minimum hourly wage is now “too high” or “too low”?
Economic challenges after Covid
Lars Osberg, McCulloch professor of economics, Dalhousie University, and research associate, Canadian Centre for Policy Alternatives-NS, comments that a big question has always been: Is there a cost, like higher unemployment, to having a higher minimum wage?
For the past year, unemployment numbers around the world have been dominated by the impacts of COVID-19, so the most reliable comparisons are from pre-pandemic times. In 2019, unemployment in Maine averaged 2.7 per cent and in California 4.2 per cent. Newfoundland and Labrador and New Brunswick have had higher unemployment than Nova Scotia for the last decade. Across Canadian provinces and OECD nations, there is no clear indication in the data of systematically higher unemployment rates in places with higher minimum wages. For many years, economists have cautioned, on theoretical grounds, that if the minimum wage were to be raised too high, employers would lay off labour when it becomes too expensive — and economists do remain convinced that a very high minimum wage (e.g., $35 or $40 an hour?) would surely cost a lot of jobs. But a conceptual possibility is not a practical reality, and careful analysis of the data on actual minimum wage changes has produced a consensus recognition in economics that over the range of minimum wages actually observed, there has not been much, if any, net job loss when minimum wages increased.1
Joseph E. Stiglitz writes that progressive capitalism is based on a new social contract between voters and elected officials, between workers and corporations, between rich and poor, and between those with jobs and those who are un- or underemployed.
Part of this new social contract is an expanded public option for many programs now provided by private entities or not at all… This new social contract will enable most Americans to once again have a middle-class life. As an economist, I am always asked: Can we afford to provide this middle-class life for most, let alone all, Americans? Somehow, we did when we were a much poorer country in the years after World War II. In our politics, in our labor-market participation, and in our health we are already paying the price for our failures. The neoliberal fantasy that unfettered markets will deliver prosperity to everyone should be put to rest. It is as fatally flawed as the notion after the fall of the Iron Curtain that we were seeing “the end of history” and that we would all soon be liberal democracies with capitalist economies.2
A higher minimum wage reduces income inequality by pulling up the earned income of the least well-off.
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