Minimum wage isn’t what’s ailing struggling families: Policies should target those who are persistently poor, and the hike to $10.45 doesn’t do that

By Charles Lammam and Hugh MacIntyre. Charles Lammam is director of fiscal studies and Hugh MacIntyre is policy analyst at the Fraser Institute. Excerpts:

"The goal of helping struggling families and the most vulnerable in society is laudable. But the problem is that the minimum wage is the wrong policy to achieve this end. Before determining what the right policy is, we first need to understand who the impoverished really are. It turns out they are overwhelmingly not minimum-wage earners.

Data from Statistics Canada for 2012 show that 89 per cent of minimum-wage earners are not part of a poor household.

According to 2014 data from Statistics Canada, 52 per cent of minimum-wage workers lived with relatives, and the vast majority of these minimum-wage workers are aged 15 to 24 with a sizable share of them still in school.
Of the remaining minimum-wage earners, 19 per cent have working spouses, meaning their household income is higher than what a single minimum wage would provide.

at least 71 per cent of minimum-wage earners are part of a household with another family earner,

An additional eight per cent live with non-relatives and likely share some of their living costs with other people.

Fortunately, the image of a single parent with young children struggling to get by on the minimum wage is rare. Again, according to Statistics Canada, this situation makes up about two per cent of all minimum-wage earners.

empirical research has found increasing the minimum wage does not have a statistically significant effect on the share of Canadians living in low income. In fact, one academic study found minimum-wage hikes increased the share of families falling below the relative poverty threshold.

54 per cent of all minimum-wage earners are young (15 to 24),

For many of these young people, earning the minimum wage is only temporary. Research shows that earning the minimum wage is often a stepping stone to higher-paid work as young people gain experience, basic skills and education.

More broadly, for Canadians who find themselves in relative poverty, their stay is almost always temporary. But there is a subset of the population (about two per cent) that struggles in relative poverty for longer periods (six years or more).

People at risk of being in this group include lone parents, people aged 45 to 64 and living alone, non-high school graduates, and people with some form of a physical or mental disability. It is not clear how raising the minimum wage will, in a meaningful way, help people in these groups escape poverty.

Policies aimed at tackling poverty should actually target those who are persistently poor. Raising the minimum wage is simply the wrong strategy."