Purpose of Minimum Wage

Minimum wage laws establish the lowest legal rate employers must pay workers. Originally introduced to reduce worker exploitation and ensure fair pay, the policy continues to spark debate across political, economic, and social spheres. Supporters argue that increasing the minimum wage helps reduce poverty, promotes fairness, and supports low-income workers who struggle to meet basic needs. Critics, however, warn of potential downsides—such as job losses, reduced hours, and higher costs for small businesses. The debate centers on whether minimum wage laws effectively balance fair compensation for workers with economic sustainability and business viability.

Key Question:

To what extent does the minimum wage fulfill its purpose of ensuring fair pay for workers, while addressing the potential economic and employment consequences?

Perspective 1 — Bernie Sanders, U.S. Senator (2021 Speech)

Raising the minimum wage to $15 an hour is not radical—it’s long overdue. In 2021, I said, “Nobody in this country should be working 40 hours a week and still living in poverty.” The current minimum wage is not enough for people to pay rent, afford healthcare, or put food on the table. It's unacceptable that billion-dollar corporations can pay poverty wages while their executives earn millions. A higher minimum wage would lift millions out of poverty, increase consumer spending, and reduce the reliance on social assistance. Workers deserve dignity, and that starts with fair compensation. It’s also an issue of racial and gender equity, as minimum wage earners are disproportionately women and people of color. Critics say it will cost jobs, but studies show modest increases don’t significantly affect employment—and the benefits to workers far outweigh the costs. Raising the wage is not just economic policy—it’s moral justice.

Perspective 2 — Canadian Federation of Independent Business (CFIB), 2023

As small business owners, we care about paying our staff fairly, but minimum wage increases have real impacts. Many small businesses operate on tight margins and can’t absorb sudden cost increases without making tough choices. A 2023 CFIB report highlighted that small businesses recovering from COVID-19 are being hit with inflation, higher interest rates, and wage hikes all at once. For some, this means cutting hours, reducing staff, raising prices, or delaying growth. Larger corporations may absorb these costs, but small businesses don't have the same flexibility. We’re not against higher wages, but changes should be gradual and predictable—accompanied by tax relief or wage subsidies. Otherwise, government policy could unintentionally put local businesses at too great a risk and reduce job opportunities for the very people it's trying to help. A balanced approach that supports both workers and small business sustainability is essential.

Perspective 3 — Ontario Living Wage Network (2023 Report)

A minimum wage is not enough to ensure workers live with dignity. According to the Ontario Living Wage Network, the current minimum wage falls far short of what’s required to meet basic needs—especially in cities like Toronto and Ottawa. A living wage reflects the actual cost of living in a region, including rent, food, childcare, and transportation. In 2023, this ranged from $18 to over $23 per hour in Ontario—well above the provincial minimum wage. Minimum wage jobs often don’t provide enough hours or benefits, forcing workers to juggle multiple jobs or rely on food banks and government aid. It’s a myth that low-wage workers are mostly teens; many are adults supporting families. Raising the minimum wage, while not a complete solution, is a necessary step toward economic justice. Workers deserve more than survival wages—they deserve to thrive.

Perspective 4 — David Neumark, Economist, National Bureau of Economic Research (2022)

While well-intentioned, raising the minimum wage can have unintended economic consequences. In my 2022 NBER paper, I found that higher minimum wages often lead to reduced employment among less-experienced or lower-skilled workers—especially in small businesses or rural areas. Employers may respond by cutting hours, reducing staff, or increasing automation. Although some studies find little to no job loss, these effects vary depending on the local economy and size of the wage hike. Additionally, higher minimum wages can increase consumer prices and strain business budgets, especially in industries like retail or hospitality. Alternatives like earned income tax credits (EITCs) can help workers without distorting hiring decisions. They boost income without imposing costs on employers, making them a more efficient anti-poverty tool. Policymakers should use a mix of strategies to support low-income workers rather than relying solely on wage mandates.