B.C. minimum wage to vault to $10.25
Summary
British Columbia’s minimum wage has been stuck at $8, the lowest rate in Canada. Our new premier, Christy Clark, has announced that by May 1st, our minimum wage will be increased to $8.75. Also, the “training wage” will be removed. By November 1st, it will be $9.50, and on May 1st 2012, our minimum wage will be finalized at $10.25. "Raising the minimum wage and eliminating the training wage is a fair and reasonable step forward in putting families first and building our economy," the new premier said in a release. However, the minimum wage for liquor servers will only be $9, as the new wages are modeled after Ontario’s wages. After November 1st, Alberta will have the lowest minimum wage with $8.80. Ontario currently has the highest minimum wage with $10.25.
Connections
The factors of aggregate demand demonstrated in this article are distribution of income. High-income families have the ability to save, while lower-income families cannot. At the same time, being wealthy gives people the ability to spend more, and this will increase the total level of consumption. The poorer families have less income and therefore do not have the ability to spend as much. When the minimum wage is increased, it mostly if not only benefits the lower-income people and increases the amount they can spend (or save). This shift in distribution of income reduces the gap between high and low income earners, and will also increase the total level of consumption.
Reflection
Many of the factors of aggregate demand involve money and the distribution of income is certainly an important factor to look at when determining the total level of spending. It is also a simply concept to understand, if you increase the income of households, then there is a very good chance of seeing an increase in total spending. Since we have only recently begun recovering from the recession, increasing the minimum wage is a great way to speed up our recovery and build our economy even further.
With the increase in minimum wage, this should increase the aggregate demand in BC. For the longest time, BC has had the lowest minimum wage and high living costs. It had many British Columbians thinking twice about their spending and starting to save. The majority of the affected were post-secondary students as they have tuition and other related costs that were necessary. With the wage increase, the aggregate demand throughout the province should be greater across all sectors.
ReplyDeleteHowever there is going to be a temporary negative effect on the economy. Small businesses will have a tough time to adjust to these new fixed costs that they have to work around. In turn, this will eventually trickle down to the consumers of these businesses as operational costs go up. Consumers will be paying more on average for many necessities and luxuries. This could result in the temporary mindset that individuals think twice about how they spend their money. But in the long term, the aggregate demand will catch up.
- Tim
^ I totally agree with Tim on this one, this minimum wage increase should increase aggregate demand across the board. As a student myself and representing people around my age group, this is definitely something positive to look forward to. Most of us just buy on impulse so a $2 increase in our wage could also mean saving $2, but as Tim pointed out, the businesses will gradually have to work around those costs and jack up prices. In the end, we may think we're making more but everything cancels out.
ReplyDeleteI totally agree with your argument. With the increase in minimum wage, life would be alot easier for everyone. Since households are really expensive and food rescouces are not cheap at all. But if minimum wage increase to $10.25 by next year, food and shelter would also increase so really i think that the government should do something about that too and probaly get rid of HST.
ReplyDeleteI agree with your explanation of how high-income earners have a superior ability to save compared to lower-income families. At the same time, wealthier people also have a greater ability to spend more which too will increase the total level of consumption. For example, when minimum wage is increased former lower-class earners are able to spend more which increases the demand in consumer purchases. Also, demand for government spending is increased as well because with more high-income earners means more equal tax rates amongst workers. I say this because it is said that people who earn more, receive a higher tax rate. For example, if I were to earn 500 a month and my friend were to earn 600, my friend would pay more tax because she is earning more than I am. If tax were to be 5% then I would be paying $25 and she would be paying $30. When the minimum wage is increased, lower-income people are impacted the most because of the significant change in benefits and spending activity. This shift from increased income will increase the total level of consumption and change the growth in economic activity as well.
ReplyDeleteI seriously believe you hit the nail head on in this post. As the minimum wage increases in British Columbia, families and individuals like you said will have a higher disposable income. I believe disposable income is the most important factor that contributes to consumer purchases. The aggregate demand in British Columbia will definitely increase with the new push from the demand for consumer purchases going up. My question to you good sir, is how confident do you feel about Christy Clark in office. Previously she had a very bad reputation with regards to her former job dealing with education. Do you think she know what she is doing by increasing the minimum wage, looking for long term benefits, or is only doing so to attract votes.
ReplyDeleteRaising minimum wage isn't always beneficial for people. Not only does it create increased job competition, but it will likely increase the price of consumer goods since the employing company will have to spend more paying off salaries. Depending on the change of demand in the market, the amount of capital investments will vary. If there is less demand, the amount of capital investment will decrease.
ReplyDeleteHowever, in conjunction with what you mentioned, increasing minimum wage would also increase the demand for consumer goods since disposable income for individuals would increase. But, mentioned from before, higher wages would also slightly increase the prices of goods.