LAU: Minimum wages hike will not increase ‘affordability’ in Alberta

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It’s curious that a cornerstone policy of the Alberta NDP’s new “Affordability Agenda” will, in addition to reducing employment, raise prices for food and other essentials.

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Specifically, the official Opposition wants the Alberta government to raise the minimum wage to $18 over three years. However, as many empirical studies show, artificially raising the cost of labour — which helps produce just about everything — means higher consumer prices. For example, a March 2026 study on California’s $20 fast-food minimum wage, which was implemented in April 2024, found the state’s minimum wage increase raised food-away-from-home (FAFH) prices (which include not only fast-food restaurants, but also full-service restaurants, bars, hotels and retail stores) by approximately 3.3%-3.6%.

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Demand declines

What happens when eating out becomes more expensive?

People do less of it.

Indeed, the study estimated the increased FAFH prices translated into declines in demand of approximately 3.9%-4.1% for fast-food restaurants and 1.7%-1.8% for full-service restaurants.

Of course, higher prices and fewer people eating out means fewer restaurant jobs. So it’s no surprise that, according to a separate study, California’s fast-food minimum wage hike destroyed an estimated 18,000 fast-food jobs in the state. While some-fast food workers received higher pay, according to economist Alex Tabarrok “the transfer is likely regressive” — meaning the costs of the minimum wage hike (higher prices and 18,000 lost jobs) were paid by people who (on average) have lower incomes than the people who benefited. That’s because lower-income households tend to spend more of their budgets on fast-food. “So the policy effectively taxes low-income consumers generally,” said Tabarrok, “to raise wages for a subset of low-income workers, while eliminating jobs for another subset.”

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Other studies point to similar negative outcomes.

Back in 2017, when the Ontario government proposed raising the minimum wage from $11.40 to $14 per hour on Jan. 1, 2018, and then to $15 the following year, the independent Financial Accountability Office of Ontario estimated the minimum wage hike would raise consumer prices by about 0.5% and kill approximately 50,000 jobs in the province or possibly even more.

According to a 2017 study by the Federal Reserve Bank of Boston, based on city-level minimum wage increases, with a “10 percent rise in the minimum wage, food away from home prices rise about 0.4 percentage point during the year of the minimum wage hike and an additional 0.1 percentage point the following year.”

Cost of doing business

Another study published in the Review of Economics and Statistics in 2022, which examined state-level minimum wage hikes, concluded “that a 10% minimum wage hike translates into a 0.36% increase in the prices of grocery products. This magnitude is consistent with a full pass-through of cost increases into consumer prices.”

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Back in Canada, raising the minimum wage not only increases the cost of labour for businesses, but as economist Philip Cross explained in a 2021 study, forces employers to pay higher CPP and EI payroll taxes, which are linked to the wage rate. Therefore, according to Cross, the “potential impact on prices from minimum wages can be significant.”

As the evidence shows, raising the minimum wage is the last thing Albertans should want in an “Affordability Agenda.”

Higher prices and fewer jobs do not make life more affordable.

Matthew Lau is an adjunct scholar with the Fraser Institute.

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