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Currently there is a proposal before Congress to reduce the Minimum Wage from $1.50 CAD to $1 CAD. The proposal has had considerable support, including from two leading lights of my party the CNC, But in my considered opinion reducing the Minimum Wage is a mistake because I do not think that it will achieve the goals that the proponents expect it to and does offer potential risks to new players.

Proponents of the reduced Minimum Wage suggest that reducing the Minimum Wage will make Canadian companies more competitive in the Export market by reducing wages at all Skill Levels. They also point out that given the low price of Q1 food is comparatively cheap and since most players who would be earning the Minimum Wage would be new players and thus wouldn't have many wellness expenditures beyond working and possibly training, Q1 food would be sufficient, Finally an argument has been presented that, since companies already compete for Skill Level 0 (henceforth SL 0) players anyway, sometimes going as high as $2, there will be jobs available at the $1.50 level anyway. Let's look at these arguments one by one, starting with the last.

Like everything related to business in eRepublik, the Job Market is cyclical. As I write this, the highest wage offered for a SL 0 worker is $1.75 from a new start-up in the Manufacturing sector. There are 12 offers available in that sector of which five are at Minimum Wage; in the Land sector the wage is $1.70 with seven postings; in the Construction sector the high wage is $1.62 from a Q1 company - with three offers available (and one of them from Q2 companies) one at Minimum Wage. It is true that I have seen the top wage for SL 0 workers go as high as $2 - and maybe a little above - it is a bit much to depend on that level being maintained. There will be times when the Minimum Wage will be the wage maintained. There will also be times when the price of Q1 food will be higher than the current $0.74. That margin of $0.26 doesn't give a Q1 player much opportunity to build his savings, particularly when you remember that in most businesses the worker pays 15% income tax. At $1.50 that tax rate takes $0.225 from the worker, leaving him with $1.275, or $0.525 more than the cost of one Q1 food. By comparison at a Minimum Wage of $1, the tax would be lower at $0.15 but the worker would have only $0.11 more than the cost of the Q1 food. That’s not much margin if the price of food goes up rather than staying stable or going down.

Next, let’s turn to assertion that reducing the Minimum Wage will have a ripple effect, reducing the wages in the other skill levels. This apparently has to do with the idea that lowering the Minimum Wage will encourage employers to hire SL 0 workers in lieu of higher SL workers which will in turn force those workers to accept lower wages. But the evil little truth is that SL 0 workers generally don’t make money for a company. They have the potential but the truth is that a worker with a SL of 2 probably at the current pay rate probably produces more profit for a company than a SL 0.5 of the same wellness produces at a reduced Minimum Wage.

But of course the reason for looking at reducing the Minimum Wage is to make Canadian goods more competitive on the international market. So let’s assume for a moment that reducing the Minimum Wage by $0.50 reduces the wages at all levels by the same amount, so that a SL 3 worker is paid $6.10 instead of the current $6.60. I can’t speak of other industries, but in the Moving Ticket industry a reduction in wages of $0.50 per worker with ten active workers represents a cost per ticket reduction of between $0.40 and $0.50. At the current rate for gold (0.033g per CAD) this represents an average reduction in cost of 0.0148g. Currently the lowest price for movement tickets is $6.51 CAD or 0.2051g, so the reduced price would be $6.01 CAD or 0.1903g. Let’s take a look at the current low prices in Gold in five countries where we are able to sell moving tickets, the Import Taxes in those places, and the cost of a Canadian ticket with Taxes included.
USA - Lowest price 0.1478g – 5% Tax – Canadian ticket with tax – 0.1997
Croatia – Lowest price 0.1416g – 15% Tax – Canadian ticket with tax – 0.2188
Romania - Lowest price 0.1586g – 99% Tax – Canadian ticket with tax – 0.3786
Spain - Lowest price 0.1575g – 10% Tax – Canadian ticket with tax – 0.2092
Latvia - Lowest price 0.1364g – 10% Tax – Canadian ticket with tax – 0.2092
So a reduction in the Minimum Wage will not deliver the desired result of reducing the price of Canadian goods to the point where they can be exported to other countries.

Where does that leave us in terms of policy? First, there is no guarantee that reducing the Minimum Wage to $1 will have a similar effect on wages at other levels. There is the potential for a reduction in the Minimum Wage to cause hardship to SL 0 workers because of the cost of food, and all of the talk of charity – whether it is mentorship programs or governmental programs such as Meals on Wheels – does not resolve the problem. The reduction in the Minimum Wage does help companies marginally but does it benefit employers enough that they will be willing to increase the number of SL 0 workers they take on? In other words would the reduction in the Minimum Wage fuel an increase in the demand for those workers who would be paid the Minimum Wage, thereby raising the wage for those workers? That may not be the case since SL 0 workers don’t really help the bottom line for companies that hire them, and experience business people know that. Finally, assuming that the reduction of the Minimum Wage does in fact reduce not only the wages for SL 0 workers but for all workers by an amount equal to the reduction of the Minimum Wage, the will not be sufficient to make Canadian goods competitive in the International marketplace. In my view this proposed reduction in the Minimum Wage does not represent good policy and should be voted down by Congress.