Minimum Wage and Household Consumption in Canada: Evidence from High and Low Wage Provinces

Leila Sabokkhiz, Fatma Guven-Lisaniler () and Ikechukwu D. Nwaka
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Leila Sabokkhiz: Faculty of Business and Economics, Eastern Mediterranean University, Famagusta 99450, North Cyprus
Ikechukwu D. Nwaka: Alberta School of Business, University of Alberta, Edmonton, AB T6G 2R3, Canada

Sustainability, 2021, vol. 13, issue 12, 1-20

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.

Keywords: minimum wage; Canada; high-wage province; low-wage province; household consumption; panel ARDL (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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