Browsing recently through the Advance, a weekly newspaper published on Nova Scotia’s South Shore, I came across grim news. A headline buried on page 12 said it all: “Unemployment rate continues as highest in a decade.”

The item began: “Statistics Canada reported the unemployment rate for economic region 240 (Digby, Yarmouth, Shelburne, Queens and Lunenburg counties) was 11.3% in August 2010, up 2.3 percentage points from August 2009…” This was the highest monthly unemployment rate in the region (which takes up much of Nova Scotia) since 1996, and more than 3% higher that the Canadian average for the same month.

Rattled by this sombre information, I quickly turned the page, and was met with an advertisement from Nova Scotia’s Department of Labour and Workforce Development. It announced that on Oct. 1, 2010, Nova Scotia’s minimum wage would be $9.65 an hour, up from $9.20.

This was the second increase in six months, and the fourth in less than two years. On May 1, 2008, the minimum wage, $7.60 an hour until then, rose to $8.10; on April 1, 2009, to $8.60; and, on April 1, 2010, to $9.20. In 18 months, Nova Scotia’s minimum wage has increased by almost 20%.

It doesn’t seem like a good idea to hike the minimum wage dramatically and frequently when the unemployment rate is very high and climbing. Nova Scotia’s labour minister, Marilyn More, has said the increases are necessary because minimum-wage workers should benefit from the global economic recovery.

I wonder if she’s taken a recent look around some of the towns in economic region 240 — Yarmouth, for example, or Liverpool in Queens County. If she has, I guarantee she didn’t see any signs of the “global economic recovery.” What she would have seen were lots of vacant storefronts.

Many (although not all) economists believe that a high minimum wage increases unemployment, particularly among workers with low productivity. Economist and Nobel laureate George Stigler argues that when the minimum wage is increased, employment may fall by more than in proportion to the wage increase, reducing the economy’s overall earnings.

A recent study by three Canadian economists at Ontario’s University of Waterloo suggests that a 10% rise in the minimum wage is significantly correlated with a 3%-5% drop in teen employment. The study’s authors conclude: “A higher minimum wage may paradoxically result in a significant negative shock to household income among low-income families.”

The arguments on both sides are complex — and often tainted by politics. But it is certain that increasing the minimum wage is dangerous in an economy with high unemployment. Why is the government of Nova Scotia ignoring this fact? IE