Increasing minimum wage doesn’t increase unemployment in Alberta

While advocating for increased minimum wage, I’ve often encountered the same arguments from people who oppose such increases.

One of those arguments is that minimum wage leads to unemployment. So, I decided to track down unemployment and minimum wage data for Alberta.

Minimum wage has increased 27 times over the last 50 years. I’m going back to only 1976 though (that’s how far back the unemployment dataset went).

Here’s a chart comparing the two datasets since 1976:

There’s not much definitive in this chart. For example, for about a 25-year period starting in the mid-1980s, unemployment fell while minimum wage rose. Minimum wage kept going up after that, but so did unemployment.

So, according to this one chart, if you blame minimum wage increases for the unemployment rising over the last decade or so, then you’d need to blame it for the dropping unemployment of the 1980s, 1990s, and the early 2000s.

Since this chart doesn’t tell us much that’s useful, maybe we should look at specific instances when the minimum wage increased. Actually, let’s look at the data surrounding the largest increases in minimum wage.

Might as well start with the most recent increases, since they’re the ones the UCP harp on the most.

Between May 2015 and April 2019, when the NDP was the governing party in Alberta, the minimum wage increased from $10.20 to $15.00, or $4.80, the largest increase over a 4-year timeframe.

During the first year and a half or so of the NDP’s administration, both minimum wage and unemployment rose. However, for the rest of their term, minimum wage kept rising while unemployment fell (or stayed stagnant).

And even when unemployment did rise, it corresponded with the 2015 recession.

So, even with raising minimum wage by nearly $5 (or 50%, as the UCP try to frame it), unemployment didn’t increase. Higher minimum wage didn’t seem to result in higher unemployment during this period.

The next largest 4-year increase began in September 2005, when minimum wage increased from $5.90 to $7.00. By the time September 2009 rolled around, minimum wage had seen 4 increases and had reached $8.80, an increase of $2.90.

Once again, there seems to be no correlation between minimum wage increases and the unemployment level. For the first 3 increases, unemployment kept dropping, although only slightly.

While unemployment was higher after the fourth increase, it had already doubled by the time that fourth increase was implemented. There’s no way it retroactively caused unemployment to go up. That was probably more likely the Financial Crisis.

Let’s look at one more chart.

This time, I’ll do the 4-year period just prior to the NDP taking office, when the PCs were wrapping up their final term before rebranding as the UCP.

Between May 2011 and May 2015, minimum wage rose 4 times, from $8.80 to $10.20, a $1.40 increase.

And once again, we see little correlation between minimum wage and unemployment. Minimum wage dropped after (and before, to be fair) the first increase, and stayed pretty stable for the next two increases.

And even with the fourth increase, unemployment stayed relatively stable (although with a slight decrease actually) for several months, before seeing a huge spike.

But like the previous example, this spike also aligns with the start of a recession. It’d be disingenuous to suggest that the fourth increase caused the spike in unemployment, especially since unemployment never rose because of the other 3 increases.

There just isn’t any evidence that increasing the minimum wage leads to increases in unemployment. Or rather, no evidence that this happens in Alberta.

Just like minimum wage doesn’t drive up inflation.

But when 87.5% of the working population already makes more than minimum wage, it’s not surprising that increasing minimum wage doesn’t negatively affect the economy in any significant way.

If anything, it improves the economy, as these workers now have more money to spend, which drives up demand, increasing jobs for workers and revenues for companies.

Theoretically speaking.

Originally published at kimsiever.ca on 17 September 2020.