Alberta’s Next Government Should Increase and Index the Minimum Wage

The party that wins Alberta’s election on May 29 will form government at a time when many families are struggling to pay their bills.

Alberta’s consumer price index (CPI) – a widely used measure of inflation – has been high for the last two years. The wages of many Albertans are not keeping up.

This is the case for minimum-wage earners, whose pay has been frozen at $15 an hour since October 1, 2018. In the meantime, the minimum wage has increased in British Columbia to $15.65 and in Ontario to $15.50.

In this article, I provide a profile of who makes minimum wage in Alberta. I then examine 2014-2019 data on minimum-wage employment by age. The next section focuses on the weekly hours worked by liquor servers as recently published by a panel established in 2019 by then-Premier Kenney. I round out the article with an analysis of indexing the minimum wage to inflation and the benefits of raising the minimum wage.

Alberta minimum wage profile

I have been researching minimum wage for Parkland Institute since 2015. Throughout that time, the general profile of the 200,000 minimum-wage workers in Alberta* has been fairly consistent:

• About 60% are women
• About 34% are the heads of their households
• About 41% are parents
• About 4% are single parents with children under 18
• About 9% are married, single earners, with children under 18
• About 73% are not teenagers
• About 34% have a post-secondary degree, certificate, or diploma
• About 58% have been in their job for over one year
• About 74% are in permanent jobs
• About 60% work for companies with more than 100 employees
  
  

Minimum-wage employment by age

The report produced by the United Conservative government’s panel includes the following data table, which summarizes Alberta minimum-wage employment by age from 2014-2015 to 2018-2019.

Source: Government of Alberta. 26 February 2020. Report of the Minimum Wage Expert Panel. Page 16.
Note: Sum of category sub-totals may not equal to overall total due to rounding.

The panel was tasked with publishing data on the employment effects of the New Democratic government’s record of increasing the minimum wage from $10.20 in 2015 to $15 in 2018.

One can assume the UCP was hoping the panel would find damning evidence to use to criticize the NDP. But the opposite happened.

The main thing that stands out from the table is that the number of jobs for almost every age cohort increased almost every year the NDP increased the minimum wage. The two exceptions were:

• The number of 15- to 17-year-olds making minimum wage declined by 1,700 in 2017-2018 but then grew by 7,600 in 2018-2019.
• The number of 40- to 44-year-olds earning minimum wage declined by 1,100 in 2015-2016 but then increased by 3,400 in 2016-2017.

The panel’s research results broadly confirm findings from the existing social science literature on the employment effects of raising the minimum wage. In short, minimum wage increases tend to result in a small percentage of teens losing their jobs, while the losses for adult workers are effectively zero. This is because the vast majority of minimum-wage workers are necessary to businesses, and if employers must cut, they lay off their least-experienced employees.

So, the NDP government raised the minimum wage by almost 50% over four years and the vast majority of minimum-wage workers kept their jobs while enjoying a fairer rate of pay.

Public policy decisions involve trade-offs. Raising the minimum wage has much higher upsides than downsides. What the panel’s report indicates is that if the NDP had not increased the minimum wage, then a small percentage of additional job gains would likely have been realized by teenage workers. Meanwhile, 200,000 workers — who are mostly women with significant work experience — would be stuck making poverty wages and being less able to support their families and local economies.

Liquor servers’ work hours

The NDP not only raised the minimum wage to $15 over four years, but they also eliminated the lower wage for liquor servers. The liquor-server rate was $9.20 when the NDP won the 2015 election, a dollar less than the minimum wage of $10.20. The NDP raised the liquor-server rate to equal the minimum wage over two years.

Eliminating the wage differential for liquor servers did not sit well with business lobby groups, such as Restaurants Canada and the Canadian Federation of Independent Businesses (CFIB). The business groups advocate for a lower wage for liquor servers with the justification that there is the potential that these workers may receive tips from customers.

In this scenario, tips effectively act as subsidies for business owners. However, there is no guarantee that customers will tip and workers in rural areas may serve fewer customers and thus receive fewer tips.

The business lobby groups claim that raising the wages of liquor servers may lead to reduced hours of work for these workers. But according to payroll data of 351 restaurants, the NDP’s wage hikes only led to “a 1.2 per cent reduction in [the] average weekly hours” of liquor servers (page 30). All things being equal, with a more than 50% increase in liquor servers’ wages in 2015-2018, these workers would come out ahead even with the small decrease in hours worked.

Restaurants Canada and the CFIB were represented on the UCP panel, and unsurprisingly the panel’s recommendations include re-introducing a wage differential for liquor servers. Implementing this recommendation, however, would only serve uncompetitive, low-wage employers, as the average wage for Alberta accommodation and food service workers was $17.09 in 2018, $18.04 in 2019, $18.14 in 2020, $18.04 in 2021, and $18.36 in 2022.

Indexing the minimum wage to inflation

Freezing the minimum wage is effectively a wage cut because workers’ spending power is eroded by inflation. Before the Kenney regime’s minimum-wage freeze, Alberta’s provincial government raised the minimum wage each year from 2011 through 2018.

If Alberta’s minimum wage had increased in line with CPI, it would have increased 2.5% in 2019 to $15.38, 1.6% in 2020 to $15.63, 4.6% in 2021 to $16.35, and 9.6% in 2022 to $17.92.

The party that wins Alberta’s 2023 election could lend support to minimum-wage workers by immediately raising the minimum wage and then indexing the minimum wage to increase each year in line with inflation.

Benefits of Raising the Minimum Wage

Always good to remember: minimum-wage jobs are essential to our economy. Keeping the minimum wage frozen is not good for workers, the government, or the economy. In fact, there are many benefits to raising the minimum wage.

Freezing the minimum wage forces many employed Albertans to rely more heavily on the government and the charitable sector for assistance to make ends meet.

Raising the minimum wage improves consumer spending power and stimulates local economies because low-income earners not only spend most of their income but also spend it chiefly in their community.

Raising the minimum wage slows down widening income inequality, especially as 60% of Alberta low-wage workers are women.

Full-time workers should not be poor. They should be lifted out of poverty, but that’s not the case with a $15 minimum wage.

While the living wage varies from community to community, it is universally over $17 an hour in Alberta. The living wage in most Alberta communities in 2022 was over $20 an hour. Earning a living wage means workers are better able to afford the necessities of life, including healthier food for their children and themselves.

Minimum-wage hikes don’t hurt our economy. They help ensure more working Albertans are fairly compensated for doing essential jobs that our entire society and economy rely on.

Alberta’s underpaid essential workers deserve nothing less than a living wage.

 

* Data sources:
1. Government of Alberta. Ministry of Labour and Immigration. June 2021. Alberta Minimum Wage Profile.
2. Annual Averages, 2019-2020, Statistics Canada Labour Force Survey.