BRIEFING NOTE ON ARGUMENTS FOR AND AGAINST ON MINIMUM WAGE

INCREASE

Purpose

The purpose of this briefing note is to presents two sides of argument on minimum wage increase
for Lululemon’s manager.

Background

Minimum wage by definition is a lowest wage rate that an employer can pay to an employee who
is covered by the legislation. Its main purpose is protecting non-unionized workers who have
unskilled jobs.

In Canada, there is a trend in increasing minimum wage. On 1-Oct 2017, Alberta was the first
province to raise minimum wage to $15. Ontario is going raise to the same amount on 1-Jan
2019.

Considerations

Arguments for
• Net positive for the economy is created. Since low-paid workers have higher spending
rate, increase in consumer spending due to higher income would offset businesses’ higher
labour cost
• Efficiency of businesses is improved as minimum wage increase would discourage firms
from creating unnecessary jobs and encouraging them to hire more productive workers
• Poverty is reduced since increasing minimum wage helps low-income household. A 10%
increase in minimum wage would reduce 2.4% number of people who are living in
poverty

Arguments against
• Job loss would occur since the demand for labour would decrease as a response to higher
labour cost. In the case of Ontario, increasing minimum wage to $15 would result in net
loss of 50,000 jobs according to the Financial Accountability Office.
• A greater deadweight loss would be created as businesses have to pay $15/hour for
workers who can only produce $10/hour
• The ability of business to invest is limited as since higher labour cost leads to higher cost
of producing goods

Conclusion

The advantages of minimum wage increase are: creating net positive for the economy, increasing
efficiency of businesses, reducing poverty. However, the disadvantages are decreasing number of
jobs, generating deadweight loss, limiting investment.
 BIBLIOGRAPHY

Current And Forthcoming Minimum Hourly Wage Rates For Experienced Adult Workers in
Canada. (2016, December 06). Retrieved January 07, 2018, from
http://srv116.services.gc.ca/dimt-wid/sm-mw/rpt1.aspx

Evans, P. (2017, June 04). 'Boosting the economy from the bottom up': Why minimum wage
hikes are a good thing. Retrieved January 07, 2018, from
http://www.cbc.ca/news/business/minimum-wage-analysis-1.4141311

Economists argue about minimum wages. (2017, July 08). Retrieved January 07, 2018, from
https://www.economist.com/news/finance-and-economics/21724802-two-studies-their-impact-
seattle-reach-opposite-conclusions-economists-argue

News, C. (2017, September 12). $15 minimum wage in Ontario would cost 50,000 jobs,
provincial watchdog says. Retrieved January 07, 2018, from
http://www.cbc.ca/news/business/ontario-minimum-wage-jobs-1.4285443

Economists argue about minimum wages. (2017, July 08). Retrieved January 07, 2018, from
https://www.economist.com/news/finance-and-economics/21724802-two-studies-their-impact-
seattle-reach-opposite-conclusions-economists-argue

Flows, C. (2017, September 12). A Case Against The Minimum Wage. Retrieved January 07,
2018, from https://www.forbes.com/sites/realspin/2017/09/12/a-case-against-the-minimum-
wage/#76e00c02499e

Ontario Chamber of Commerce strongly objects to potential labor and employment standards
reforms. (2017, May 15). Retrieved January 07, 2018, from http://www.occ.ca/media-
release/ontario-chamber-of-commerce-strongly-objects-to-potential-labour-and-employment-
standards-reforms/