The Ontario NDP has introduced a private member’s bill to increase the Ontario minimum wage from $7.75/hr to $10.00/hr, and its cousins in Ottawa have proposed a $10/hr minimum wage for workers under federal jurisdiction.

The question is: why? We know that the link between those who earn the minimum wage and those who are in poverty is tenuous. And although the short-run effects of increasing the minimum wage on employment are – as far as we can tell – insignificant, evidence from Canada suggests that the long-run effects are non-negligible. The expected effects of an increase in the minimum wage on poverty are approximately zero; a much more effective policy would be something like an earned income tax credit as in the US and Quebec.

In the US context, Card and Krueger conclude (h/t to Alex Tabarrok)

The minimum wage is a blunt instrument for reducing overall poverty,
however, because many minimum-wage earners are not in poverty and
because many of those in poverty are not connected to the labor
market.  We calculate that the 90-cent increase in the minimum wage
between 1989 and 1991 transferred roughly $5.5 billion to low-wage
workers…. an amount that is smaller than most other federal
antipoverty programs, and that can have only limited effects on the overall income distribution.

Interestingly enough, this point of view is shared by the people at Toronto’s Daily Bread Food Bank. In their profile of food bank clients,  they note that 

It is often assumed that the low minimum wage is the reason for hunger amongst the working poor. Indeed, the minimum wage stayed at $6.85/hr in Ontario between 1995 and 2004. However, Figure 10 shows 53% of all food bank clients earn more than $10/hour, higher than the current minimum wage of $7.75/hour; just 10% receive exactly the current minimum wage. The key issue identified in the research is not the wage, but that food bank clients only work, on average, 25 hours weekly. Working part-time hours, 72% of employed clients are not receiving health benefits. Sixty percent say they want more hours at work, but are unable to get them from their employer.

Their preferred policy? An earned income tax credit.

When economists and food bank activists agree that a minimum wage increase is unlikely to do anything to reduce poverty, you have to wonder why the NDP thinks it’s a good idea.

Update: A longer discussion of the effects of the minimum wage on employment and poverty is here.