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Comparing Candada to Missouri's Minimum Wage Debate

October 24, 1996
By: Kelly Just
State Capital Bureau

You've heard the debate from both sides of Missouri's minimum wage issue.

Now let's look at how a minimum wage hike has affected a country with a similar economic structure...Canada.

K-B-I-A's Kelly Just is from Canada. She brings us a unique perspective on how the minimum wage issue has affected a province of her country.

OutCue: SOC

British Columbia or B-C is Canada's most western province...and, since last October, it has been paying workers seven Canadian dollars-an-hour...the highest minimum wage rate in the country.

Based on current exchange rates...7 Canadian dollars equals five-dollars and 25 cents in U-S currency.

British Columbia's economy relies mostly on tourism, the service sector, forestry and mining. The province has the second lowest unemployment rate in the country.

Despite an unemployment rate that continues to fall and a growing economy...some see the recent minimum wage increase as a hindrance.

Suromitra Sanatani (shur-oh-MITHRA san-ah-TAN-ee) is the director of the Canadian Federation of Independent Business in B-C.

She says most businesses objected to a higher rate when it was first announced.

RunTime: 20 sec
OutCue: "of your costs"
Contents: Sanatani says that in general, having the highest minimum wage is considered a barrier to creating more jobs, especially in the low scale areas because these are low-skilled jobs and the margins aren't very high in a small business and labor costs are the biggest part of cost.

Sanatani disagrees with the often heard argument that the minimum wage needs to be raised to a level people can comfortably live on.

She says those kind of jobs are only meant to be stepping stones, especially for young people.

Sanatani blames the higher wage rate for British Columbia's youth unemployment at 16 percent.

She suggests that when employers must pay seven dollars an hour, they choose the more experienced workers to fill the slots.

The Fraser Institute is a probusiness research center for social and economic policy in Vancouver.

Policy Analyst, Fazil Mihlar (fah-ZEAL ME-lar) studies the minimum wage situation in Canada and abroad.

He agrees with Sanatani that B-C youth have suffered under a higher wage well as those already on government assistance.

Mihlar says while he understands the desire to lower the poverty rate and improve people's standard of living...there's no evidence to show an increase in the minimum wage makes that happen.

In fact, he suggests those good intentions may cause harm.

RunTime: 40 sec
OutCue: "big mistake"
Contents: Mihlar says that the evidence proves that the people affected the most are the less educated, high school dropouts, youth workers and single parents. He says the higher minimum wage directs employers to the people with more skills and these groups end up getting over looked because of their lack of experience.

Labor groups don't see eye to eye with Mihlar, Sanatani, and other probusiness organizations.

Bill Tielman is the Director of Communications for the B-C Federation of Labor.

He supports the idea of lowering the poverty rate through a higher base wage...and says there's no excuse for rich countries like the U-S and Canada to pay workers less than they need to survive.

Tielman suggests that the economy grows even faster when workers bring home more money.

RunTime: 27 sec
OutCue: "not saving it"
Contents: Tielman says that landlords and small business seem to forget that people on a low income spend their money as they get it...they don't save or invest. He says that sort of instant spending stimulates the with even more money in their pockets...this crowd will spend even more.

Tielman says there's probably no better time for a wage increase in Missouri.

RunTime: 26 sec
OutCue: "a modest increase"
Contents: Tielman says that with the U-S economy being quite successful in the last few years...he would argue that the time to raise the minimum wage where it will cause the least amount of disruption is when your economy is growing, goods and services are being produced and sold and when you have be ability to absorb a modest increase.

The Fraser Institute also worries about a higher wage eroding the province's competitive edge.

Mihlar says that since last year's wage hike, British Columbia has probably lost some business to its closest neighbors...Washington state and the province of Alberta to the east.

But he suggests Missouri has even more to worry about with seven surrounding states...all with borders just a few hours away.

RunTime: 23 sec
OutCue: "Illinois or Kansas"
Contents: Mihlar says if Missouri's minimum wage is raised, relative to Illinois, the price of goods will increase and consumers will decide to buy out of state...possibly in Illinois or Kansas.

Mihlar points to phone companies that now operate out of the Caribbean instead of the United States as an example of an industry that's relocated to lower its operating costs.

He says dropping equipment prices may also lure employers to replace people with machines.

Either way, Mihlar suggests that as always, customers will hunt for the best bargain...and unless Missouri companies can lower costs...that may mean shopping across the border.

RunTime: 22 sec
OutCue: "lay off labor"
Contents: Mihlar says that if companies can't cut costs...they end up passing it along to the consumer. He says people will shop somewhere else if they have to and any decrease in business could result in layoffs.

But, Tielman and the Federation of Labor say it's absurd to blame slower competition on a minimum wage hike.

RunTime: 30 sec
OutCue: "frankly ridiculous"
Contents: Tielman says that no one competes on the basis of the lowest price for fast food or has cross border shopping wars over the best deal at McDonalds...where most minimum wage jobs are located. He says competition relies on many more factors and it's ridiculous to pinpoint only the minimum wage.

Tielman says competition and job losses are always cited when the wage rate is discussed. But aside from an occasional anecdote, he says there's been no proof.

Tielman does have some advice for Missourians when they go to the polls.

RunTime: 23 sec
OutCue: "sure try it"
Contents: Tielman says that B-C has not seen any increase in poverty, we've not seen any increase in social problems...while at the same time there's been a decrease in the unemployment rate each time the minimum wage has gone up. He jokes that if B-C is doing something wrong, folks in Missouri should give it a try.

It's barely been more than one year since B-C got the highest minimum wage in some studies have yet to be conducted.

While there's no perfect solution, it appears that at least for now, British Columbia has found the best of both worlds...a dropping unemployment rate and a higher wage.

Just more food for thought before the November election.

Reporting for K-B-I-A's Capital Edition, I'm Kelly Just.