$15 Minimum Wage? Not as the NDP Would Have It

Well, it looks like Justin Trudeau can kiss the hard-core pothead vote goodbye. The NDP have just figured out a way to take it away from him.

At the cost of economic disaster, mind you. But all the same.

Recently, the NDP rolled out a proposal to increase Canada's federal minimum wage -- the minimum wage applicable to federally-regulated industries -- to $15 an hour. Sounds great, right? Well, not if you pay attention to history.

Here's what history tells us about raising the minimum wage, at least under certain circumstances: as of 2014, Canada's minimum wage, adjusted for inflation, was all of one cent more than in 1974. In 1974 the minimum wage in Ontario was just $2.74. Forty years later, it's $10.14. That might seem like a significant increase, until you consider that $2.74 adjusted for inflation is $10.13.

There's a reason for this: wage pressures are inflationary. And when a wage pressure is government-induced, that inflation is guaranteed. It's basic economics: if you increase the cost of an input, such as labour, entrepeneurs will increase the price they demand for their product. Suddenly everyone is paying more for everything so everyone's dollar is worth less.

So will a $15 minimum wage really improve things for minimum wage earners? As it turns out, no. Not only would it not really improve anything for minimum wage earners, it would result in catastrophic losses for the middle class, and more-bearable-losses for the wealthy. As the price of everything from housing to utilities to groceries to clothing to, well, everything will rise, swallowing up what might otherwise appear to be gains. No one gets further ahead, and everyone would fall further behind. (At least it would reduce income inequality!)

That's how the NDP would have it. But a $15 minimum wage could work without such a disaster... if accompanied by offsetting corporate and small business taxes. And we all know how much the NDP loves cutting corporate taxes.

But deep corporate and small business tax cuts -- perhaps as much as 50% of the current rate -- may be the only way to stave off the inflation that would otherwise accompany a $15 minimum wage. That puts the NDP at something of an impasse.

If they can't find it in themselves to navigate this impasse in the only workable way, the NDP's $15 minimum wage proposal would be nothing more than a blueprint for another Great Depression.