Source: Fightback

When the UCP was first elected in 2019, cuts were immediately on the menu. One of the government’s first acts was to assemble a team of capitalist representatives to “investigate” the impacts of the $15 minimum wage. But when the investigation concluded, the government hid its report for three years.

The report was finally released this March. Now that it’s out, it’s not hard to see why they kept it under wraps. The report shows how little evidence there is that the minimum wage increase had any negative effect on Alberta’s economy, and the UCP kept it hidden to spare them the embarrassment. 

Shortly after the NDP came to power in 2015, they passed legislation to raise the provincial minimum wage from $10.20 per hour to $15 by 2018. This was met with pure disgust by the capitalist elite. Right-wing groups like the Fraser Institute put out statements saying that raising the minimum wage would actually increase poverty. The Financial Post called the move a “looming nightmare” for economists and business owners, warning that it would lead to inflation.

The NDP government went ahead and implemented the increase anyways, yet somehow we managed to avoid the apocalypse. As we’ve analyzed elsewhere, Alberta’s economy remained relatively stable through the wage bump. 

This was unacceptable to the UCP, who were determined to find any justification that wages needed to be lower. Soon after they beat the NDP in the 2019 election, they appointed a “Minimum Wage Expert Panel” to investigate the economic impact of the wage increase.

Yet the labour ministry had no intention of releasing the report at all, as they admitted openly this summer. It only came out at the behest of University of Alberta economics professor Joseph Marchand, the panel’s chair. 

Even now, the UCP has continued to distance themselves from it. Current labour minister Brian Jean praised the panel’s work, but stated that the report is mostly valuable in a “historic context”

The government also maintains that they have no intentions to change the province’s wage structure. However, if they were planning wage cuts, it’s very unlikely they would announce them right before a provincial election. The labour movement should keep its guard up. It’s likely the UCP will be singing a different tune in a few months. 

Meet the panel 

Most of the so-called expert panel was made up of executives from food service and retail. In other words, it represented the industries that are the most reliant on minimum wage labour and likely to be the most resentful of the increase. When then labour and Immigration minister Jason Copping was asked how many members of the board made minimum wage, he replied, “I can’t answer that question,” which we can assume is probably code for “very few”. The panel composition was as follows: 

  • Anindya Sen, economics professor at the University of Waterloo
  • Mark von Schellwitz, vice-president of Restaurants Canada
  • Richard Truscott, vice-president of the Canadian Federation of Independent Business
  • Jason Stanton, owner of The Running Room
  • Branko Culo, owner of Express Employment in Edmonton
  • Rachel Donnelly, a server at Chop Steakhouse
  • Delphine Borger, a server at Blink Restaurant
  • Nicole Lyckama, another server at Blink Restaurant.

Restaurants Canada is a lobbyist group that represents the interests of big food industry executives. All three of the workers placed on the panel were employed by companies with strong ties to Restaurants Canada. Leslie Echino, the owner of Blink, and Alan Howie, who owns the company that controls Chop Steakhouse, are both board members of the lobby. How could these servers have possibly felt comfortable speaking freely at panel meetings when they had their bosses looking right over their shoulders the entire time? 

If that’s not ridiculous enough, CBC discovered at the time that one of the Blink servers, Delphine Berger, is Leslie Echino’s half-sister! 

It should be clear to everyone that the panel wasn’t composed with the intention of impartial investigation. The UCP wanted cuts, so they filled the panel up with business buddies who wanted cuts too. But even this group, which was handpicked by the government for this very purpose, was unable to find any compelling evidence that the $15 minimum wage negatively affected the economy. 

Findings and methodology 

The report’s findings are predictable. It claims that there were 23,000 to 26,000 job losses as a result of the new minimum wage. As such, it recommends that the government drop the minimum wage for minors (a change that the UCP already implemented before the report came out) and liquor servers. 

According to the report, these losses were almost exclusively concentrated among the youngest layers of the population. The panel asserts that the wage caused a 13 per cent decrease in employment among 15–19 year olds and a 3.3 per cent decrease among 20–24 year olds. It plainly admits that “employment impacts for older adults were statistically insignificant with respect to the minimum wage.”

The report also admits that unemployment was unaffected in the main urban centres. It states,  “The analysis reveals that employment in the major urban regions of Calgary and Edmonton appear to have not been affected by the 2015-2018 minimum wage increase. Even when Calgary and Edmonton are analysed separately, no statistically significant change in employment is found for either urban centre due to the policy.” 

So if one were to take the report totally at face value, the worst assumption is that the minimum wage caused a layer of teenagers in small towns to lose their jobs, and caused a slight bump of unemployment for workers just a couple years older than them. 

But even these modest findings crumble under close scrutiny. The report’s methodology does not match its purported findings. In other words, the report observes an increase of unemployment for young people, but doesn’t actually prove this was caused by the minimum wage. 

The report mainly bases itself on two statistical methods. The first is regression analysis. In mainstream statistics, regression analysis is considered to be a useful tool to discover correlation between two variables. However, it doesn’t necessarily tell us anything about causation. Just because two points of data are correlated does not mean that one caused another.

For example, if you collected stats on how many people drowned in pools and how many people ate ice cream on a given day, you may find that they are highly correlated. But logically we know eating ice cream doesn’t make you drown. The truth may be found in a third variable: in this case, the weather. Hot weather causes both people to eat ice cream and also makes people swim more, leading to more drownings.

Similarly, if you gathered statistics on Albertans who donate to the UCP and Albertans who steal candy from small children, you may find a lot of overlap. But that wouldn’t necessarily mean that people steal candy from small children because they donate to the UCP—the reverse is also equally possible. 

One data expert who spoke with Harvard Business Review noted that you can’t make assumptions about the information provided from regression analysis, but that “you must go out and see what’s happening in the real world. What’s the physical mechanism that’s causing the relationship? A lot of people skip this step, and I think it’s because they’re lazy.” This is exactly what the panel did—they skipped a step. They found a correlation between the higher minimum wage and youth unemployment, but never provided any concrete analysis to back up how the minimum wage would cause employment.

The other main method used in the minimum wage report is what they call a “synthetic control technique”. This section was based on the research of the two panel economists, Fossati and Marchand. This synthetic control technique involves constructing a hypothetical comparison group from data from different sources. In the case of the UCP’s report, the panel took data from across the western provinces—mostly Saskatchewan—to construct what Alberta may have looked like without the minimum wage increase. They then compared this “control Alberta” to our real Alberta and looked for differences in unemployment. All this was summarized in the minimum wage report itself.

A 2014 paper by the Economic Policy Institute notes that there is debate among economists over how best to apply such techniques. This is no surprise. These statistical models are highly abstract, as a glance at the 2022 paper by the panel’s economists will show. A huge number of choices must be made: what examples to include, how to weight the examples, and which parameters to control for. Depending on precisely what choices the analyst makes, the results will differ. Thus, many studies using these methods find that minimum wage hikes do not affect employment, while many others find the opposite. That said, the Economic Policy Institute paper writes, “the strongest studies find little or no evidence that such [minimum wage] increases have a negative impact on employment.” With this in mind, we should be sceptical of any conclusions drawn from such methods.

Without this, all the report has is the regression analysis, which establishes that the bump in unemployment coincided with the wage increase—something we already knew. However, the report fails to establish that the increase caused the unemployment bump, which can be explained in a whole number of other possible ways.

For instance, the report makes very little mention of the surrounding economic context. In 2018, Alberta was still recovering from the 2014 recession, which was possibly Alberta’s worst ever. Alberta Federation of Labour president Gil McGowan argues job losses during this period can be attributed to the oil crash. 

It could also be the case that after the minimum wage increase less youth were looking for jobs. How many of these young people took on a job because their family needed additional income? It’s possible that the increase in minimum wage lightened the financial load for struggling families, so fewer 15–19 year olds were forced to work.

It’s also worth pointing out that around 2017, the NDP was considering new employment laws that would have imposed limitations on the kinds of jobs that youth could actually perform. Businesses could have felt disincentivized from employing teens.

The closest thing the paper presents to hard empirical research is a survey taken asking business owners whether or not they’ve had to roll back hours or employment because of the minimum wage. To be honest, this section of the report is a total joke. A survey like this should be taken with the largest grain of salt. These businesses can say virtually anything that they want; there’s no guarantee that it’s any reflection of the economic reality in this province. 

The point is, there are plenty of arguments we can make to explain the panel’s findings. This is the problem. As explained above, causation can only be proven by arguments about the real world. Yet, other than citing surveys of business owners, the report leans entirely on abstract mathematical analysis—with no thought about what this analysis actually means. On this incredibly flimsy basis, the panel recommends wage cuts for youth and liquor servers. In reality, with no concrete analysis, the report demonstrates nothing but the two economists’ math skills.

Fight for higher wages!

The $15 minimum wage was the biggest conquest of the NDP, and one of the only reforms from that government that hasn’t been cut. Making $15 an hour was life changing for many workers. They felt a degree of financial security for the first time in their lives. It’s unlikely that workers will take a minimum wage cut sitting down. 

But whenever a worker demands decent wages, there’s always an economics professor or business owner just around the corner ready to jump out and scream bloody murder. Workers are always told that wage increases will cause inflation and unemployment. But this is a total myth. If anything, this report from the UCP is proof of that. If there was any stronger evidence to suggest the $15 minimum wage caused damage in Alberta, then the UCP would have found it, and would never let anyone hear the end of it. 

The truth is that there is plenty of money for higher wages. The food, retail, and other service companies enjoy profit margins that heavily outweigh what they pay their workers. The six biggest oil companies in Canada recorded record profits of $35 billion in 2022. In comparison, $15 an hour seems pretty measly. 

Likewise, as the current capitalist crisis worsens, the ruling class will try to do whatever they can to pass the economic burden on the working class. Even if they’re denying intentions to do so now, the UCP will inevitably try to cut wages. 

The labour movement must be prepared to defend the current minimum wage from attacks and fight for further increases. Gil McGowan noted that the cost of living has increased 10.3 per cent since the report was written, and 13.5 per cent since $15 an hour was implemented. Workers’ livelihoods are being eaten away by crisis and inflation.

This is very true. But it’s not enough to comment on it and leave it there. The labour movement needs to place wage increases on its immediate agenda. Every union needs to take up the demand of cost-of-living adjustments (COLA) and catch-up pay on top of the demand for immediate wage increases. Only through an active, bold movement is it possible to resist attacks from capitalist politicians and make meaningful gains.