Abstract
The minimum wage is a major factor for the successful implementation of much of the sustainable development goals (SDGs). The present research will investigate whether minimum wage (MW) as a sustainable wage policy improves household consumption. Thus, a panel-based analysis comparing high wage (Alberta, British Columbia, Ontario, and Saskatchewan) and low wage provinces (Manitoba, New Brunswick, Newfound land/Lab, Nova Scotia, Prince Edward Island, and Quebec) is employed for the Canadian case within the study period from 1981 to 2019. We analyze the long-term and short-term effects of MW on household consumption using the Dynamic Autoregressive Distributed Lag techniques of the Pooled Mean Group, Dynamic Fixed Effects, and Mean Group estimators. Results show that the long-term impact of MW on household consumption is positive in both the low- and high-wage provinces. The short-term effect is negative in both wage groups, but not significant for the low-wage group. This offers significant debate on the relevance of the MW towards economic stabilization and consumption-led growth.
Highlights
The debate on whether the implementation of national minimum wage (MW) laws can lead to improved welfare and, subsequently, the stimulation of economic activities has been controversial
The MW can be perceived as the core foundation on which most of the sustainable development goals (SDGs) are anchored
Differences in the MW across provinces could result in varying trends of household consumption, Gross Domestic Product (GDP) per capita, and interest rates. We explore these potential differences by demarcating provinces as low-wage provinces (Group 1) and high-wage provinces (Group 2) while evaluating the effect of the MW on Canadian household consumption
Summary
The debate on whether the implementation of national minimum wage (MW) laws can lead to improved welfare and, subsequently, the stimulation of economic activities has been controversial. The MW can be perceived as the core foundation on which most of the sustainable development goals (SDGs) are anchored This is because poverty reduction (goal one), zero hunger (goal two), quality health and well-being (goal three), quality education (goal four), gender equality (goal five), clean water and sanitation (goal six), affordable and clean energy (goal seven), decent work and economic growth (goal eight and nine), reduced inequality (goal ten), as well as responsible production and consumption are all core tenets of sustainable development, which require sustainable wage levels in varying degrees.
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