The Wage Crisis

Day 268, 17:30 • Published in Canada Canada • by latro

The issue which is now on most people's minds is that of the minimum wage and the poor job market. In this article I will take a look at the current system and te solutions to its problems as well as offer an opinion.

Currently, Canada has a minimum wage of 3 CAD. This poses a problem to business owners because a new employee with a skill of 1 and middle wellness cannot produce 3 CAD worth of goods each day. This means that businesses cannot afford to train level 1 employees because they lose money doing so and at level 2 the employee can likely find better salaries at Q2 businesses (instead of the trainer profiting from the increased skill).

Now, if the free market was allowed to take its course under these conditions, workers would have an incredibly hard time finding work at level 1. To prevent this state of affairs, the government offers subsidies to Q1 "training companies" to help cover their costs. The problem facing us now is that there is an influx of new players, meaning that there is more demand for training. Since each level 1 employee costs the company money, the government subsidies are no longer anough to allow these businesses to remain profitable at the minimum wage so many players are unable to find a job. As Canada's population will continue to increase exponentially, this problem will get larger if it is left alone. A solution must be proposed.

One idea that presents itself is to increade the size of the government training grants. This would have to be done to an extent that it completely covers the costs of training with a margin of profit left over (some altruistic business owners may be content to operate at a loss for the good of Canada, but most won't). Ideally, the amount would be specifically tailored to the number of employees that the company is training and the industry and would likely require a new government post to regulate. Needless to say, this is a lot of money. It would certainly drain government resources and, after a time, would require issuing more money (causing inflation) or the raising of taxes. Neither of these are particularly desirable.

Another idea that has come up is government-run Q1 training companies. While this may be somewhat cheaper than the abover option, it does not remove the financial problems. Worse, it would compete with other Q1 businesses which would be unable to compete with the official trainers in terms of employee salaries and would be forced to close down or immediately upgrade. This would hurt entrepreneurs and prevent new businesses from starting up (as well as shaft current Q1 companies). Overall, it would drive a stake through the heart of the Canadian economy.

A third option is to eliminate the mininum wage. This would allow the free market to determine the wages of new players and they would likely settle at a bit less than 1 CAD. Owners of Q1 businesses would now be able to make profits from their companies in this system, though, and hence jobs at these companies would become more readily available. This is because managers would increase profits by hiring new employees, not decrease profits as is the case now. This solution does not require any spending from the government and only causes temporary salary decrease for players; salaries for more skilled players will remain unchanged (and new players will soon be able to move over to this category).

Now, none of these options will be as good as the current situation. However, the current situation is impractical at this time; it has failed us and we must move on. Any solution is going to result in harmful effects to some people. The first two options I mentioned hurt the entirety of Canada's population (be it through taxation or inflation). The third inconveniences only the new, and only for about 5 days (the time it takes to raise a skill to level 2). After this point, salaries would be unchanged. Unlike the other solutions, it actually helps Q1 business owners by allowing them to turn a profit without having to seek help from the government. It is this solution, the removal of the minimum wage, which I endorse.

While wellness levels of new players may rise more slowly, this can be compensated for by a government sponsored gifting program. This could be done using the funds freed up by removing Q1 training subsidies. (Such a program would also poisitively affect the gift industry.)

The principal advantage of eliminating the minimum wage, however, is that it is better than the alternatives. No miracle solution to our economic woes has arisen and likely never will. Of the options available to us it does by far the least amount of harm and while that is hardly a ringing endorsement, something must be done and this is the best way forward.