Tax cuts, not wage hikes, help workers (Guest commentary)

Removing low-income earners from the tax rolls is an effective weapon in the war on poverty
By Peter Holle
|Canadian HR Reporter|Last Updated: 02/07/2008

Raising minimum wages and increasing government subsidies are two approaches often suggested to help the working poor. But there is a far simpler way to put more money into their pockets: Stop forcing the lowest-income workers to pay income tax.

Hikes in minimum wages are lauded by some anti-poverty campaigners and trade unionists as small victories against low wages and poverty. But the unintended consequences of such well-meaning initiatives do more harm than good.

When minimum wages are forced up, the number of jobs or extra hours of work available for the least skilled and educated workers actually decreases because they have effectively been rendered uneconomic. In particular, opportunities for newcomers to the labour force, many of whom are single and living at home, and who just want to find a way to enter the workplace, are diminished. Businesses that would like to hire more workers cannot afford the higher rates.