top-rated free essay

Research on the Change of Minimum Wage in Ontario

By halfgodhuang Apr 17, 2013 1773 Words
ABSTRACT
The purpose of this research paper is to analyze the minimum wage in Ontario based on the current minimum wage is $10.25 in Ontario. The minimum wage mainly happens to the unemployed women and the young. The research on the minimum wage can permit people to contribute to the discussion about the ongoing minimum wage policies in Ontario and the relevant impacts of raising the minimum wage in this province. This research paper will be divided into three parts. Firstly, this research paper will represent the introduction to the writing significance. Secondly, this paper will analyze the change of minimum wage in Ontario, which also be divided into third sub-parts. In the first place, this paper will introduce the theoretical framework. In the second place, this paper will introduce the general situation on the change of minimum wage in Ontario. Next, this paper will analyze the importance of minimum wage in the labor markets. And a conclusion will be made in the end. Research on the Minimum Wage in Ontario

1. Introduction
The minimum wage is generally considered as a controversial policy tool[1]. The minimum wage is one of potentially useful tool for redistribution of social wealth because it can increase the wages of low skilled workers[2]. However, other factors of production may become the expense for the increase of low skilled workers’ wage, such as the wages of higher skilled workers and capital. Therefore, it is essential to analyze how the minimum wage becomes $10.25 today and the impacts of the change of it. The purpose of this research paper is to analyze the minimum wage in Ontario, which can provide a chance for people to contribute to the discussion about the ongoing minimum wage policies in Ontario and the relevant impacts of raising the minimum wage in this province. Meanwhile, the change of minimum wage in Ontario can be influenced by some factors.

2. The Analyses of the Change of Minimum Wage in Ontario
In labor economics, the minimum wage is often analyzed in a competitive labor market model and a model in which the employers are granted with some degree of monopsony power. 1. The Theoretical Framework on Minimum Wage

The competitive labor market model involves the demand side and supply side. The demand side refers to the demand of labors of all the firms in the market. The supply side can illustrate that firms in the market have to pay higher wages to attract and retain workers. In the graph of competitive labor market model, there are the market supply curve and the demand curve, and these two curves have a cross point, which can be considered as the equilibrium wage rate. When a minimum wage is introduced in a competitive labor market, the reduction of employment will rely on the steepness of the labor demand curve. Meanwhile, the decrease in employment will lead to the increase in the wage rate in the competitive labor market[3]. 2. The General Situation on the Change of Minimum Wage in Ontario In 1991, the then current level of minimum wage in Ontario was $5.40 per hour[4] and the relevant authorities and governments in Ontario proposed that the minimum wage in Ontario should be raised to “a level of 60 percent of the average Ontario wage by 1995”, which made Ontario become the province with the highest minimum wage level in Canada[5]. However, during the period from 1995 to 2002, due to conservatives in office in Ontario, the minimum wage did not increase[6].

Theoretically, all the people in Ontario may suffer minimum wage. However, in practice, most of people suffering minimum wage are low skilled individuals holding low-paying jobs[7], including students, liquor servers, homeworkers, etc. What’s worse, in Ontario, the minimum wages of students’ liquor servers and homeworkers are less than general minimum wage. For example, the minimum wage of liquor servers is about $1.00 per hour less than general minimum wage.

Over the past two decade years, some significant changes of minimum wage have happened to Ontario. Firstly, the liberal government raised the minimum wage from $6.85 per hour in 2003 to $8.00 per hour in 2007. Meanwhile, the Ontario Employment Standards Acts became effective in March, 2010, which regulates that the general minimum wage in Ontario is $ 10.25 per hour. Nominally, the minimum wage increased by 50% from 1995 to 2010, but due to the increase of the price level and appreciation of dollar, the real value of the minimum wage just raised by 10% during this period. According to Reid, the nominal minimum wage between 2007 and 2010 increased 28% from $8.00 to $10.25, however, due to the increase of price level, the real minimum wage increased by 23% during this period. As a result, from the above analysis, it is reasonable to gain the conclusion that the nominal minimum wage in Ontario increased to larger extent, however, the real increase of minimum wage in Ontario was not significant. 3. The Impacts of the Change of Minimum Wage in Ontario

This part will analyze the employment effects and the distributional effects of the change of the minimum wage in Ontario analyzed in the prior part. There are some discussions on the employment effects of minimum wage. Some people hold the opinions that minimum wage has a negative impact on employment, but other people think that there is little impact on employment impact. According to this paper, there is indeed a negative impact of the increase of minimum wage on the employment. Canadian evidence can prove that a 10% increase in the minimum wage probably lead to the reduction of the employment of students by 3%-6%[8]. On the contrary, the effects on the young adults are slight. Since the Ontario is the province with the highest minimum wage in Canada, the adverse employment effects have been exacerbated. What’s worse, the unemployment rate has risen due to the increase of minimum wage in Ontario[9].

Moreover, the relationship between minimum wages and poverty is too vague. For example, the people suffering minimum wage are always very poor and due to the minimum wage, the wealthy gap between the poor and the rich become larger and larger. However, due to the increase of minimum wage, some of social wealth has been transformed to the poor to realize the redistribution of social wealth[10]. 4. Comparability to other province

Minimum wages are diverse among different province in Canada. British Columbia’s minimum wage is $10.25 that is the same as Ontario’s and Alberta is $9.75 that is lower than Ontario’s[11]. The unemployment rate of Ontatio is 7.8 , British Columbia’s is 6.7 and Alberta’s is 4.6.[12] This evidence might lead to that lower minimum wage plays a role in the low unemployment rate in Alberta. But since the minimum wage in Ontario is the same as British Columbia’s, the unemployment is different though. The effect of minimum wage on uneployment is ambuglous.

3. Conclusion
In conclusion, lower-skilled people in Ontario, including the students, homeworkers and liquor servers, are suffering minimum wage and even, their minimum wage level is less than general minimum wage level. Since 1990s, there have been some continuous and significant nominal changes happening to minimum wage in Ontario. However, in fact, due to the increase of price level and appreciation of dollar, the increase of minimum wage in Ontario is not significant. Meanwhile, the changes of minimum wage have some effects on employment and redistribution of social wealth. Although the increase of minimum wage in Ontario may increase unemployment rate, it can realize the redistribution of social wealth to narrow the wealthy gap between the rich and the poor.

Bibliography

Cousineau Jean-Michel, Tessier David and Vaillancourt. 1992. The Impact of the Ontarian Minimum Wage on the Unemployment of Women and The Young in Ontario. Industrial Relations: 47(3), 559-566.

Gunderson, Morley. 2007, Minimum Wages: Issues And Options for Ontario. Ontario: Ontario Ministry of Finance. [cited on Feb.28th, 2013]. Available from World Wide Web:< http://keqianxu.bokee.com/1306641.html>.

Lee David, and Saez Emmanuel. 2008. Optimal Minimum Wage Policy in Competitive Labor Markets. NBER Working Series of National Bureau of Economic Research. No. 14320.

Reid Frank. 2012. Monopsony in the Labour Market and Minimum Wages. Department of Economics and Centre for Industrial Relations& Human Resources.

Shannon Michael, and Beach Charles. 1995. Distributional Employment Effects of Ontario Minimum-Wage Proposals: A Microdata Approach. Canadian Public Policy: 21 (3), 284-303.

Susan Munroe. 2013. Minimum Wage in Canada. Available from About.com:

Statistics Canada, Labour Force Survey. 2013. Annual Average Unemployment Rate Canada and Province. Available from Government of Newfoundland and Labrador website: . -----------------------
[1] Lee David, and Saez Emmanuel. 2008. Optimal Minimum Wage Policy in Competitive Labor Markets. NBER Working Series of National Bureau of Economic Research. No. 14320 [2] Lee David, and Saez Emmanuel. 2008. Optimal Minimum Wage Policy in Competitive Labor Markets. NBER Working Series of National Bureau of Economic Research. No. 14320. [3] Reid Frank. 2012. Monopsony in the Labour Market and Minimum Wages. Department of Economics and Centre for Industrial Relations& Human Resources. [4] Cousineau Jean-Michel, Tessier David and Vaillancourt. 1992. The Impact of the Ontarian Minimum Wage on the Unemployment of Women and The Young in Ontario. Industrial Relations: 47(3), 559-566. [5] Shannon Michael, and Beach Charles. 1995. Distributional Employment Effects of Ontario Minimum-Wage Proposals: A Microdata Approach. Canadian Public Policy: 21 (3), 284-303. [6] Reid Frank. 2012. Monopsony in the Labour Market and Minimum Wages. Department of Economics and Centre for Industrial Relations& Human Resources. [7] Cousineau Jean-Michel, Tessier David and Vaillancourt. 1992. The Impact of the Ontarian Minimum Wage on the Unemployment of Women and The Young in Ontario. Industrial Relations: 47(3), 559-566.

[8] Gunderson, Morley. 2007, Minimum Wages: Issues And Options for Ontario. Ontario: Ontario Ministry of Finance. [cited on Feb.28th, 2013]. Available from World Wide Web:< http://keqianxu.bokee.com/1306641.html>. [9] Gunderson, Morley. 2007, Minimum Wages: Issues And Options for Ontario. Ontario: Ontario Ministry of Finance. [cited on Feb.28th, 2013]. Available from World Wide Web:< http://keqianxu.bokee.com/1306641.html>. [10] Lee David, and Saez Emmanuel. 2008. Optimal Minimum Wage Policy in Competitive Labor Markets. NBER Working Series of National Bureau of Economic Research. No. 14320. [11]Susan Munroe. 2013. Minimum Wage in Canada. Available from About.com: [12] Statistics Canada, Labour Force Survey. 2013. Annual Average Unemployment Rate Canada and Province. Available from Government of Newfoundland and Labrador website: .

Cite This Document

Related Documents

  • Minimum Wage

    ...The Minimum-Wage Controversy The minimum wage sets a minimum on what employers are allowed to pay workers. In the United States, the federal minimum wage began in 1938 when the government required that covered workers in covered industries be paid at least 25 cents an hour. At that time, the minimum wage was about 40 percent of the average ma...

    Read More
  • Minimum Wage

    ...The concept of minimum wage is to ensure that employers do not pay wages below the mandated level. However this does not always happen instead this policy ends up hurting these workers and the economy in terms of lower job opportunities. This is because the increase of labor costs keeping all other things constant would eat into the net profits ...

    Read More
  • Minimum wage

    ...Minimum wage in Nepalese Labor Market Minimum wage is the price floor imposed by the government for the welfare of labor. Price floor is the legal minimum on the price at which a good can be sold. It is an attempt by the government to maintain prices at other than equilibrium levels. When a government imposes a price floor, there will be t...

    Read More
  • Minimum Wage

    ...raising the minimum wage to benefit workers who cannot support themselves and their families with their current salaries. The articles, Why We Need to Raise the Minimum Wage and Why We Shouldn’t Raise the Minimum Wage tell us that there were some controversies in raising the minimum wage. As an economics major, I believe it is a bad idea to ra...

    Read More
  • Persuasive Research on Minimum Wage

    ...controversial topics that surround money is if the government should increase the minimum wage to help boost our frail economy and lower class. The lower class has suffered the past few years with the recession and high unemployment rates and making any kind of change to the minimum wage would affect them directly. Changes to the minimum wage ...

    Read More
  • Minimum Wage

    ...Union address, President Obama aggressively addressed the age-old debate of raising the minimum wage. The President has urged legislators to raise the federal minimum wage to $10.10 per hour to fight the ongoing battle of class inequality. Subsequently, Massachusetts legislators proposed a bill that would incrementally raise the state minimum ...

    Read More
  • minimum wage

    ...of Minimum Wage   One might ask, what is minimum wage? Minimum wage is the lowest hourly amount an employer can pay an employee. There may be some exceptions based on the type of worker. There are two kinds of minimum wage rates, state and federal. Right now, the current minimum wage is $7.25 per hour. In some states, minimum wages are highe...

    Read More
  • Minimum Wage

    ...English 1301 November 5, 2013 Argument Rough Draft Do minimum wage workers deserve a better paying wage? Perhaps a wage that they are believed to be able to live off of? Will raising the minimum wage help those it really intends to? With unemployment pushing 8% nationwide and costs rising, nationwide people are pushing for minimum wage to b...

    Read More

Discover the Best Free Essays on StudyMode

Conquer writer's block once and for all.

High Quality Essays

Our library contains thousands of carefully selected free research papers and essays.

Popular Topics

No matter the topic you're researching, chances are we have it covered.