Legislated Minimum Wages
We have examined wage differentials arising in competitive and non-
competitive labour markets. Government can also affect observed wage
differentials by legislating minimum wages. Governments in Canada and
many other countries legislate specific minimum wages which define
the lowest wage rates that may legally be paid. In 2019, minimum wages
ranged from $10.96 per hour in Saskatchewan to $15.00 per hour in
Alberta.
Although legislated minimum wages are now an accepted part of the
labour scene in Canada and many other industrialized countries, there is
significant debate among economists about the benefits from such a
policy. As our analysis in Chapter 5 indicated, a binding price floor in a
competitive market leads to a market surplus of the product—in this case,
an excess supply of labour, or unemployment. Thus, theory predicts that
a policy that legislates minimum wages in an otherwise competitive
market will benefit some workers only by hurting others. In the cases of
non-competitive labour markets, however, the analysis is a little more
complicated.
Predicted Effects of a Minimum Wage
Minimum-wage laws usually apply uniformly to almost all occupations,
but they will be binding only in the lowest-paid occupations and