Business
Do Minimum Wage Laws Accomplish Anything?
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David Clinton
All the smart people tell us that, one way or another, increasing the minimum wage will change society. Proponents claim raising pay at the low end of the economy will help low-income working families survive in hyper-expensive communities. Opponents claim that artificially increasing employment costs will either drive employers towards adopting innovative automation integrations or to shut down their businesses altogether. Either way, goes the anti-intervention narrative, there will be fewer jobs available.
Well, whatāll it be? Canadian provinces have been experimenting with minimum wage laws for many years. And since 2021, the federal government has imposed its own rate for employees of allĀ federally regulated industries. There should be plenty of good data out there by now indicating who was right.
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Historical records on provincial rates going back decades isĀ available from Statistics Canada. For this research, I used data starting in 2011. Since new rates often come into effect mid-year, I only applied a yearās latest rate to the start of the following year. 2022 itself, for simplicity, was measured by the new federal rate, with the exception of British Columbia whoās rate was $0.10 higher than the federal rate.
My goal was to look for evidence that increasing statutory wage rates impacted these areas:
- Earnings among workers in full-service restaurants
- Operating profit margins for full-service restaurants
- Total numbers of active businesses in the accommodation and food services industries
I chose to focus on the food service industry because itās particularly dependent on low-wage workers and particularly sensitive to labour costs. Outcomes here should tell us a lot about the impact such government policies are having.
Restaurant worker incomeĀ is reported as total numbers. In other words, we can see how much all of, say, Manitobaās workers combined took home in a given year. For those numbers to make sense, I adjusted them using overall provincial populations.
Income in British Columbia and PEI showed a strong correlation to increasing minimum wages. Interestingly, BC has consistently had the highest of all provincesā minimum wage while PEIās has mostly hung around the middle of the pack. Besides a weak negative correlation in Saskatchewan, there was no indication that income in other provinces either dropped or grew in sync with increases to the minimum wage.
Nation-wide, by weighting results by population numbers, we got a Pearson coefficient 0.30. That means itās unlikely that wage rate changes had any impact on take-home income.
Did increases harm restaurants? It doesnāt look like it. I usedĀ data measuring active employer businessesĀ in the accommodation and food services industries. No provinces showed any impact on business startups and exits that could be connected to minimum wage laws. Overall, Canadaās coefficient value was 0.29 – again a very weak positive relationship.
So restaurants havenāt been collapsing at epic, extinction-level rates. But do government minimums cause a reduction in theirĀ operating profit margins? Apparently not. If anything, theyāve becomeĀ moreĀ profitable!
The nation-wide coefficient between minimum wages and restaurant profitability was 0.88 – suggesting a strong correlation. But how could that be happening? Donāt labour costs make up a major chunk of food service operating expenses? Here are a few possible explanations:
- Perhaps many restaurants respond to rising costs by increasing their menu prices. This can work out well if market demand turns out to be relatively inelastic and people continue eating out despite higher prices.
- Higher wages might lead to lower employee turnover, reducing hiring and training costs.
- A higher minimum wage boosts worker incomes, leading to more disposable income in the economy. Although the flip-side is that we canāt see strong evidence of higher worker income.
- Higher wages can force unprofitable, inefficient restaurants to close, leaving stronger businesses with higher market share.
In any case, my big-picture verdict on government intervention into private sector wage rates is: thanks but donāt bother. All that effort doesnāt seem to have improved actual incomes on a population scale. At the same time, it also hasnāt driven industries with workers at the low-end of the pay scale to devastating collapse.
But Iām sure it has taken up enormous amounts of public service time and resources that could undoubtedly have been more gainfully spent elsewhere. More important, as theĀ economist Alex Tabarrok recently pointed out, minimum wage laws have been shown to reduce employment for the disabled and measurably increase both consumer prices and workplace injuries.
Break The Needle
Canada-US border mayors react to new border security initiative
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US President Donald Trump has linked his threat to impose 25-per-cent tariffs on Canadian goods to Canadaās failure to address drug trafficking and illegal migration at the Canada-US border.
Ontario has responded with a border security initiative, Operation Deterrence, which is drawing tepid support from Ontario mayors of border communities.
āAbsence of leadership from Ottawa has created this [scenario] where the provinces are all going in to be Captain, or Miss Captain, Canada,ā said Mike Bradley, the mayor of Sarnia, Ont., a city of 75,000 that sits on the Ontario-Michigan border.
ā[But] anything that helps on the policing side to deal with the black plague of fentanyl is welcome,ā Bradley said.
Operation Deterrence
On Dec. 6, Ontario redeployed 200 Ontario Provincial Police officers to unpoliced border areas near the 14 official Ontario-US border crossings, which are staffed by the Canada Border Services Agency.
Officers are using aircraft, drones, boats, off-road vehicles and foot patrols to ādeter, detect and disruptā the illegal trafficking of drugs, guns and people, a Jan. 7 provincialĀ press releaseĀ says.
Premier Fordās office and Ontario Solicitor General Michael Kerzner declined to provide further details about the operation in response to requests for comment.
But a spokesperson for the Ontario RCMP said there is little evidence that fentanyl trafficking is a significant issue at the Canada-US border.
āThere is limited to no evidence or data from law enforcement agencies in the U.S. or Canada to support the claim that Canadian-produced fentanyl is an increasing threat to the U.S.,ā the spokesperson told Canadian Affairs in an emailed statement.
The spokesperson highlighted that fentanyl trafficking frequently occurs by mail, rather than at physical border crossings.
āReports state fentanyl produced in Canada is being exported in micro shipments, most often through the mail. Micro traffickers are most often found on the dark web,ā the spokesperson said.
As Canadian Affairs reportedĀ last week, seizures of fentanyl at the Canada-US border remain relatively low. But Canadian authorities have seized significant volumes of precursor chemicals used in the production of fentanyl, and key sources say Canada is a major player in the global fentanyl trade.
Data also show illegal migration is a concern along the Canada-US border.
The U.S. Customs and Border ProtectionĀ reportedĀ nearly 200,000 cases of individuals in Canada trying to illegally enter the US in the 2024 fiscal year.
Canada Border Services AgencyĀ dataĀ indicate just under 5,000 individuals were detained trying to enter Canada from the US in 2023-24.
Borderlands
Jim Diodati, the mayor of Niagara Falls, says he is supportive of Ontario launching Operation Deterrence in response to Trumpās tariff threats.
āIām glad at least weāre reacting,ā he said. āThe concerns, of course, are that things are slipping through the cracks ā¦ both for drugs, guns and human smuggling as well.ā
But Diodati stressed that border concerns go both ways. He hopes Operation Deterrence will also address firearms trafficking from the US into Canada.
āNinety percent of illegal guns that come into Canada come from the US side, across our borders,ā he said.
Diodati blames Ottawa for underfunding the Canada Border Services Agency, the federal agency responsible for border security and immigration enforcement. āCBSA needs more resources,ā he said.
āThe US sees our border as porous, not as secure as theirs, and now, with the incoming president, theyāre looking to punish us over it.ā
Bev Hand is the mayor of Point Edward, a 2,500-person village located a short drive north of Sarnia, on the southern tip of Lake Huron. The community connects to Port Huron, Mich., by the Blue Water Bridge, a key Canada-US border crossing.
Hand expressed cautious support for Operation Deterrenceās aims of addressing drug trafficking.
She noted that, since 2019, there have been 16 major drug busts at the Point Edward border, including two significant cocaine seizures by U.S. Customs and Border Protection. InĀ December 2023, US authorities found nearly 500 kg of cocaine in a truck entering the US. InĀ August 2024, US authorities discovered over 120 kg of cocaine hidden in the wall of a truck bound for Canada.
āFifteen of the seizures were in transport trucks,ā she said. āThis represents millions of dollars in illegal drugs, and we donāt know what wasnāt captured.ā
Hand noted, however, that funds allocated to border security might be better spent on addressing the root causes of drug trafficking, such as addiction.
In December, Ottawa announced it would spend an additional $1.3 billion over six years on enhancing its border security. Ontario has not disclosed how much Operation Deterrence will cost.
Like Diodati, Hand also emphasized the role Operation Deterrence could play in helping to curb firearms trafficking from the US.
She referenced a May 2022Ā caseĀ where a resident discovered a bag with 11 handguns in a tree near Port Lambton, Ont., a city approximately 15 kilometres south of Point Edward.
āThe package had fallen from a drone that is assumed to have come from the US side,ā she said.
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āFentanyl Czarā
Bradley, Sarniaās mayor, said border security initiatives must be balanced against the need to facilitate trade, particularly at critical crossings like the CN Rail tunnel ā which runs beneath the St. Clair River and connects Canada to Michigan ā and Blue Water Bridge.
āWe want security, but you also want trade, and thatās the balance right now that weāre struggling with,ā Bradley said.
A 13-yearĀ reviewĀ by professors at Carleton University found that tighter Canada-US border security following the 9/11 attacks increased inspection times and delays at the border. This has ānegatively impactedā bilateral trade and cost the Canadian economy billions in foregone economic opportunities and productivity.
Diodati, of Niagara Falls, said he would prefer to see Canada and the US take a bilateral approach to border security that focuses on bolstering security around the continent.
āWe want to take a perimeter approach around North America, rather than the borders between us,ā he said.
While diplomatic relations between Canada and the US are tense, further collaboration on border security may be on the horizon.
On Feb. 3, Trump paused the imposition of tariffs on Canada after Canadian Prime Minister Justin Trudeau promised Canada would send nearly 10,000 frontline personnel to protect the border.
āCanada is making new commitments to appoint a Fentanyl Czar, we will list cartels as terrorists, ensure 24/7 eyes on the border, launch a Canada-U.S. Joint Strike Force to combat organized crime, fentanyl and money laundering,ā Trudeau wrote in aĀ postĀ on social media platform X.
āI have also signed a new intelligence directive on organized crime and fentanyl and we will be backing it with $200 million.
āProposed tariffs will be paused for at least 30 days while we work together.ā
This article was produced through the Breaking Needles Fellowship Program, which provided a grant toĀ Canadian Affairs, a digital media outlet, to fund journalism exploring addiction and crime in Canada. Articles produced through the Fellowship are co-published by Break The Needle and Canadian Affairs.
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Business
Vance, Elon criticize judge for blocking DOGE from Treasury Department
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“J.D Vance” byĀ Gage Skidmore, licensed byĀ CC BY-SA 2.0.
Ā MxM News
Quick Hit:
Vice President JD Vance and Elon Musk criticized a federal judgeās decision to block DOGE officials from accessing the Treasury Departmentās payment system, calling it an overreach of judicial power. The ruling temporarily halts political appointees’ access to financial data, intensifying tensions between the White House and the judiciary.
Key Details:
- U.S. District Judge Paul Engelmayer issued an order barring DOGE officials without security clearances from accessing Treasury payment systems through at least next Friday.
- Vance called the ruling āillegal,ā arguing that judges cannot interfere with executive power, while Musk called for Engelmayerās impeachment.
- The lawsuit, filed by 19 Democratic state attorneys general, is one of many legal challenges to the Trump administrationās government overhaul efforts.
Diving Deeper:
Vice President JD Vance and billionaire Elon Musk areĀ pushing backĀ against a federal judgeās decision to block the Department of Governmental Efficiency (DOGE) from accessing the Treasury Departmentās payment system, calling the ruling a violation of executive authority.
The temporary injunction, issued by U.S. District Judge Paul Engelmayer, an Obama appointee, restricts DOGE officialsāincluding political appointees and special government employeesāfrom accessing the Treasuryās payment infrastructure unless they have proper background checks and security clearances. The judge cited concerns that the administration had overstepped legal boundaries in granting access to sensitive financial data.
Vance, in a social media post Sunday, accused the judge of unlawfully interfering in executive matters. āJudges arenāt allowed to control the executiveās legitimate power,ā he said. Musk followed with more pointed remarks, calling for Engelmayerās impeachment and arguing that the ruling was politically motivated.
The lawsuit, brought by 19 Democratic state attorneys general, is part of a broader legal effort to block President Trumpās aggressive attempts to cut federal spending and restructure government operations. So far, multiple courts have placed temporary holds on various White House initiatives, including a buyout program for federal employees and a workforce reduction at USAID.
Critics of Vance and Muskās response argue that the administration should follow legal protocols rather than attacking the judiciary. Former Transportation Secretary Pete Buttigieg dismissed their criticisms, saying, āIn America, decisions about what is legal and illegal are made by courts of law. Not by the Vice President.ā Former Rep. Liz Cheney also weighed in, stating that the administrationās recourse is through the appeals process, not by undermining the courts.
Musk has defended DOGEās role at the Treasury Department, stating that the changes his team proposed were necessary to improve financial oversight and ensure accurate reporting of government spending. He claimed that Treasury and DOGE ājointly agreedā on new reporting requirements and emphasized that longtime career government employees were implementing them.
The legal battle is still in its early stages, with a hearing scheduled for Friday to determine whether the judgeās temporary order should be extended. Meanwhile, Trump signaled that DOGE would soon shift focus to the Education Department and military spending, setting the stage for further clashes with the judiciary.
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