immediately after the change in legislation. Proponents of this view argue
that the total employment effects of minimum wages can be detected only
by examining the data over longer periods of time.
Several Canadian studies have examined the relationship between
minimum wages and employment (or unemployment). Though the
studies differ in their approaches and data used, there is a broad
consensus that minimum wages decrease the level of employment (and
raise unemployment), particularly for low-skilled workers. Since workers
with few skills often earn only low wages, a binding minimum wage has a
larger impact on the employment prospects of these workers than it does
for higher-skilled, higher-wage workers. In this sense, the Canadian
results confirm the theoretical predictions of the effects of minimum
wages in competitive labour markets. In these cases, the wage gains by
the majority of workers who retain their jobs must be set against the loss
of employment by a smaller group of workers.
The debate in Canada regarding the effects of minimum wages heated up
in 2018 as Alberta and Ontario legislated large increases in their
minimum wages. Business groups and many economists argued that
sudden wage increases of roughly 20 percent would harm small
businesses and reduce employment. Others argued, based on the logic of
part (ii) of Figure 14-6 , that for many low-wage jobs we could expect
modest gains in employment. Determining the actual impact of these
policies will need to await the collection and analysis of future data—and
will no doubt keep many economic researchers quite busy!