A new report issued by the Bank of Canada forecasts that the Canadian economy will lose 60,000 jobs in 2018 as minimum wage levels rise across the country.
The central bank in Ottawa published the report in an attempt to calculate and quantify the impact that a higher minimum wage in much of the country will have on the national economy.
As of January 1, Ontario, Canada’s most populous province, raised its minimum wage to $14 an hour from $11.60 previously. By the end of 2018, Alberta, Quebec and Prince Edward Island are also expected to increase their minimum wage levels.
Economists have been hotly debating the likely impact that the rise in earnings will have on Canada’s economy, with some arguing that higher wages will prove to be a boost for the economy and others saying the costs are too high and will result in employers scaling back on workers and throwing the job market into turmoil.
Based on the economic models used by the Bank of Canada, the economy could have roughly 60,000 fewer jobs by the end of 2018 due to the hike in the minimum wage. The central bank’s worst case scenario is that Canada loses 136,000 jobs this year as a result of the requirement for employers to pay their workers a higher hourly rate.
``Although empirical evidence is mixed on the magnitude of minimum wage effects, most studies for Canada find that the reduction in employment is statistically significant, especially for younger workers`` the Bank of Canada wrote in its report.
While minimum wage workers stand to benefit in the form of higher salaries, they could potentially also be hurt as the job market in their sector may dry up, making it harder to get a job if they lose their current one.
There are spillover effects for other people too, according to the central bank report. Workers earning slightly more than minimum wage can expect to see their wages increase as well. Overall, the central bank says almost one out of every six Canadian workers (17%) can expect to see their salary increase as a direct result of the minimum wage hikes planned for 2018.