British Columbia·Q & A

Minimum wage increases are 'supercharging' economy, says U.S. multimillionaire

As the fight to raise the B.C. minimum wage sputters, we speak to multimillionaire Nick Hanauer, who is leading a campaign to pay workers more across the U.S.

'People who are defending these low wages today essentially are free riders,' says Nick Hanauer

"There are two reasons you might want to raise wages for workers. The first is because you feel sorry for them, a social justice argument. But the bigger argument to be made, is it's good for growth. It's good for the economy," said Seattle multimillionaire Nick Hanauer. (TEDSalon NY2014)

A multimillionaire leading a campaign to pay workers more across the United States says raising the minimum wage, whether there or in B.C., is simply "supercharging" the economy.

The B.C. Federation of Labour's campaign to raise the minimum wage to $15 an hour in British Columbia has sputtered, after the provincial government announced it would tie the minimum wage to the consumer price index.

But the push for higher wages is seeing success in other Canadian jurisdictions. Alberta Premier Rachel Notley has promised a $15 an hour minimum wage by 2018.

In the U.S., Seattle, and most recently, Los Angeles, have introduced $15 an hour minimum wage hour legislation.

Seattle-based venture capitalist and multimillionaire Nick Hanauer rejects common arguments that raising the minimum wage will kill jobs and hurt the economy.

"The reason to raise these folks' wages, isn't because you feel sorry for them," Hanauer told The Early Edition's Stephen Quinn.

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"You're not giving them a hand out. What you're doing is supercharging your local economy."

Here are some more highlights of Nick Hanauer's chat with the CBC's Stephen Quinn: 

The most common response to the idea of a higher minimum wage from business groups, and I suppose wealthy people like yourself, is that higher minimum wages kill jobs and hurt the economy. Why do you reject that way of thinking?

That's just not how capitalism works. The fundamental law of capitalism is that when workers have more money, businesses have more customers and need more workers... [There's been] essentially 100 years of wealthy owners telling workers that if wages go up, employment will go down, but in fact it never happens.

Workers react as the Los Angeles City Council approved a $15 minimum wage by a 13-1 margin in June. ( Damian Dovarganes/Associated Press)

The only thing that's really true about the claim that when wages go up, employment goes down, is that if people like me can get people like your listeners to believe it's true, it will work out really, really well for people like me. The truth is that this claim really isn't a description of reality. It's more of a scam or an intimidation tactic. It's essentially a threat that powerful people use against not powerful people to scare them away from higher wages.

But we hear it repeated over and over again. There's a think-tank here called the Fraser Institute. They say a significant increase in the minimum wage could lead to a 12 to 17 per cent loss in employment. How do you try to assuage those fears?

Look back historically to the moments when wages went up and take a look at what happened in the past...What you will always find is that when wages go up, particularly when wages go up for everyone all at once, what you find is robust, economic growth.

My state and city, Washington, Seattle, is a fabulous example... We already pay much, much more than the federal minimum... We now pay $11 for all workers. That compared to the $7.25 federal minimum. But particularly, in the United States, we have this thing called a tip penalty, so if you 're a tipped worker in Mississippi or something like that, you will earn $2.13 plus tips...

Hanauer says that in some areas of the U.S., people working in the service industry get paid far less than even minimum wage, due to a 'tip penalty.' (Toby Talbot/Associated Press)

Surely if what your friends at that think-tank said were true, we would have no restaurants in Seattle or Washington state, because we're paying five times what neighbouring states are paying. Yet, of all the big cities in the country, Seattle has the second highest density of restaurants in the country and we follow only San Francisco, which has the most restaurants per person in the country and they pay $1.25 more than we do...

You have to understand, from the point of view of an individual business owner, paying more wages is bad. Who wouldn't want to pay their workers poverty wages and keep profits high? But the problem is, everybody can't have that deal. If no one pays their workers good wages, then who will buy the stuff and who will pay the taxes?

The people who are defending these low wages today, essentially are free riders. They're parasites on the larger economy.

So you're making this argument to legislators and they're buying in?

Yeah... A worker in the United States who earns a federal minimum of $7.25 isn't going out to restaurants. They're not going to the hair salon. They're not getting piano lessons or sending mom flowers on Mother's Day. All they're spending their money on is a little bit of rent, a little bit of food, and if they're lucky, a bus pass...

When these workers are paid reasonable wages, 100 per cent of that money comes back into the economy in terms of demand, and a huge part of the burden of supporting those folks, and taking care of them and the social services that they would require because of those poverty wages disappears.

To hear the full interview, listen to the audio labelled Nick Hanauer