Wednesday, March 21, 2007

Raising the minimum wage isn't enough

If the reports this morning are true, the McGuinty government in Ontario is set to raise the minimum wage to $10.25 per hour over the next three years from the current level of $8. It's not the immediate increase some social activists have been demanding, but it's certainly a positive step.

Eight bucks an hour isn't that much. Presuming a 40 hour work week, 50 weeks per year (with a two week vacation) that works out to $16,000. Hiking that to $10.25 will raise the annual income to $20,500 -- barely above the poverty line for a single person but certainly adequate. There is also direct link between higher incomes and improved mental and physical health so some of the strain on Medicare should be alleviated.

There are some other things Ontario could do in tomorrow's budget. Not the least of these are raising the exemption, eliminating the marriage penalty and fully integrating the provincial child care supplement into the federal benefits. It's also my hope that the increased federal transfers to Ontario -- about a billion per year over the next two years -- goes towards fixing health care and opening more day care spaces, not to irresponsible tax cuts.

Vote for this post at Progressive Bloggers.

3 comments:

Progressive Maritimer said...

I agree that the minimum wage in Ontario should be increased but I fundamentally agree both with the idea of an immediate increase and the three-year implementation proposed by the McGuinty government. If you want to make an increase of over 25%, it needs to be phased in over a longer period of time. As I have argued many times on this issue, large minimum wage increases disproportionately hurt small businesses and rural areas, particularly businesses in rural areas that are near cities. A sharp minimum wage increase is not a form of corporate wealth distribution (remember, businesses pass on costs to the consumer and the employee, they don't accept reduced profit) but rather a penalty on the competitiveness of our small businesses.

Second, what is this mythical "marriage penalty" that people continue to speak about. The "marriage penalty" does not exist.

BlastFurnace said...

Thanks for your feedback Michael. The "marriage penalty" that's often referred to is the fact that if there is a stay at home parent, or a single parent with at least one child, the exemption for that dependent is less than the basic exemption would be if the second spouse was working or if the kid had a job of his or her own.

This issue has been addressed previously in BC, Alberta, Saskatchewan, Québec and Nunavut -- the basic exemption and the spouse or "equivalent to spouse" amounts are the same in those jurisdictions. The feds did the same in Monday's federal budget and I think it's time Ontario did the same. It's not quite the same result as income splitting but it would be a welcome step.

Progressive Maritimer said...

I was asking the question rather rhetorically. I know what the so-called "marriage penalty" is; I just question its actual existence (much in the same way I question the idea of a "fiscal imbalance").

I would argue that the penalty is simple an opportunity cost. If the family decides to have a stay at home parent, they sacrifice their classification as a standard tax payer. I have a fundamental philosophical problem with a tax system that moves towards treating families as the revenue generation/tax paying unit as opposed to the individual. I am fine with tax exemptions for spouses and dependents but I think the primary focus has to be the individual. Eliminating the "marriage penalty" is another step towards making the family the unit of focus

The system does not impose a penalty. Those who make the choice to have certain family structures incur a loss of tax payer status. Remember, there is nothing in marriage that obligates someone to stay out of the workforce.