CHAPTER 3 The Role of Government in a Market Economy



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On the international scene, minimum wage legislation first appeared in New Zealand in 1894.The first provinces of Canada to enact minimum wage legislation were British Columbia and Manitoba, in 1918. By 1920, four other provinces-Nova Scotia, Ontario, Quebec and Saskatchewan-had followed their example.

More presently, starting February, Ontario's lowest paid workers are getting a 25% an hour raise starting February; Labour Minister Steve Peters announced the minimum wage in Ontario will increase from $7.75 an hour to $8.00. Activists have argued the minimum wage should rise to at least $10 an hour to keep the working poor above the poverty line, but the Liberal government claims that would cause undue hardship to businesses.

In contact to Chapter Three, The Role of Government in a Market Economy, we noticed the necessity of income distribution in a free-market. Today, one of its main purposes is to protect non-unionized workers in unskilled jobs, although it can also influence, directly or indirectly, the level of compensation of other employees as well. But the concern is that will increase minimum wages really help to reduce poverty? The answer is an increase in the provincial minimum wage may help those with higher earning potential, but reduces employment for the lowest wage and lowest skilled workers. Increasing the minimum wage “ratchets up” all wages in all industries and reduces job opportunities for entry-level workers. In most provinces there are certain groups of employees (such as some farm workers and domestic servants) who are exempt from minimum-wage coverage. For these workers, increases in the minimum wage are ireelevant and do not aid their financial situation.

In conclusion, it is important that government sets a minimum wage so that it helps to reduce the level of poverty among the working poor although it may not be very helpful to help all the people are away from poverty. Personally, I would like to see the government increase it because most of us are working at minimum wage which is very low.