Competitive tax rates would help employment of low-skilled workers

Minimum wage may seem like the right policy to help low-skilled workers enter the Canadian workforce, but is there a better way to help address income inequality?

According to a new report from Fraser Institute senior fellow Philip Cross, the problem with minimum wage is that they do little to lower poverty rates and can actually hurt the low-skilled workers they are meant to support.

All Canadian provinces have increased minimum wage rates in recent years, but in his report - The Minimum Wage, Lost Jobs, and Poverty in Canada – Cross says that little more than 1% of minimum wage earners work for more than five years at the minimum wage.

He also says that when rates rise, businesses often respond by laying off workers, cutting their hours, or reducing hiring.

Cross also states that a large share of minimum wage earners are living in households where there is a higher wage earner – young workers living with their parents for example – which limits the impact that minimum wage rates have on poverty rates.

“The goal of governments should not be increasing the share of employees earning the minimum wage. The goal should be creating labour-market conditions so robust that most employees are earning more than the minimum,” he writes in the report.

So, what’s a better solution?

“If governments want to help low-skilled workers and people entering the workforce, they should implement policies, such as competitive tax rates, which help businesses grow and create opportunities for Canadians,” Cross said.