The Effect of the Minumum Wages on Household Expenditure in Canada, 1998-2009

Abstract

Minimum wage increases have been increasingly popular as policy makers look to increase the incomes of lower and moderate-income working individuals. In this paper I estimate the impact of the minimum wage legislation on household expenditure using data from the Canadian Survey of Household Spending (1998-2009). I explore whether increases in the minimum wage affect household income, total expenditure and 12 categories of household spending. I first consider the full sample of households where the household head is under 30 years of age and not currently enrolled in school. Then I separate this sample into married and single households. For the full sample my estimates imply that a $1 increase in the minimum wage is associated with an increase in household income of 18.4% and an increase in total expenditure of 4.7%. Overall, increases in the minimum wage appear to be successful at improving the welfare of young households. However, the benefits are not borne by all households equally. After a $1 increase in the minimum wage, income in married households increases by 19.8%, as compared to single households where income decreases by 28.0%. Further, total expenditure increases by 5.1% for married households compared to an insignificant increase of 2.9% for single households.