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The Week

U.S. debates minimum wage (Or, why you’d be better off as a Canadian Senator) Add to ...

These are stories Report on Business followed this week.

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The wage debate
President Barack Obama struck a nerve in his State of the Union address this week with a proposal to hike America’s minimum wage, saying no one with a full-time job should be plagued by poverty “in the wealthiest nation on Earth.”

With his plan to hike the level to $9 by 2015, from $7.25 now, the President rekindled an age-old debate, as The Globe and Mail’s Richard Blackwell and Tavia Grant report.

Some observers believe that hiking the minimum wage kills jobs, particularly among unskilled workers, while those on my side of the debate deem it just.

Either way, it’s a hot-button issue for the President’s second term.

“Raising the minimum wage and making sure it keeps pace with the cost of living means a raise for 15 million workers, the vast majority of whom are adults, and indirect increases for millions more, lifting many out of poverty," the White House said in a fact sheet that accompanied the President’s address.

"A range of economic studies show that modestly raising the minimum wage increases earnings without reducing overall employment, and in fact employers may see a more stable work force due to reduced turnover and a customer base with more money to spend.”

In a recent study published by the National Bureau of Economic Research, David Neumark and J.M Ian Salas of the Department of Economics at the University of California at Irvine, and William Wascher of the Federal Reserve Board, took a look at several new studies.
Their conclusion: “The evidence still shows that minimum wages pose a trade-off of higher wages for some against job losses for others, and that policy makers need to bear this trade-off in mind when making decisions about increasing the minimum wage.”

As you can imagine, the minimum levels vary widely across the United States, from a low of $5.15 in Georgia to a high of $9.19 in Washington.

Among the states, minimum pay is lower in four, higher in 19 and at the same level in 22. Ten states also link their minimum wages to inflation, which the President is also proposing.

In any state, the highest of the two is the one that rules the day.

(For a look at minimum wage across the OECD, see the accompanying chart.)

Millions of Americans are impoverished, millions are on the equivalent of food stamps, and, of course, millions were displaced by the recession and can’t find work at all. Thus, it’s a debate that’s sure to rage on.

(In Canada, of course, we’re now debating things at a far higher level, like the expense accounts of certain Senators.)

Balsillie sells RIM shares
First, Jim Balsillie stepped down last year as co-chief of Research In Motion Ltd. Now, he's sold all of his shares in the BlackBerry maker he helped push to the top of the technology world, only to see its fortunes slide.

As The Globe and Mail's Iain Marlow reports, Mr. Balsillie, now an adviser to several venture capital firms and startups, at one point held just over 5 per cent of RIM, which is renaming itself BlackBerry. In documents filed with the U.S. Securities and Exchange Commission, he now lists his share holdings at zero.

Mike Lazaridis, Mr. Balsillie's co-chief until the two resigned, still controls almost 30 million RIM shares, or about 5.7 per cent.

Mohamed steps down
The chief executive of Canada's Rogers Communications Inc. had a late-night surprise for the markets Thursday: He's leaving the post early next year, about five years after taking over from the founder of the telecommunications giant.

As The Globe and Mail's Steve Ladurantaye and Rita Trichur report, Nadir Mohamed was deemed a steady hand at the helm, among other things pulling off a deal for joint ownership of Maple Leaf Sports and Entertainment. (Let's ignore the fact he got a losing hockey team.)

His departure comes at a key time for the industry in Canada, although RBC Dominion Securities analyst Drew McReynolds said that while "this announcement comes a few years earlier than we expected, we would expect a constructive transition.”

Miners hit by writedowns
It's been a tough week for big Canadian miners, notably in Africa.

As The Globe and Mail's Pav Jordan reports, both Barrick Gold Corp. and Kinross Gold Corp. reported earnings this week that included hefty writedowns related to their African operations.

Kinross kicked it off with a hit of $3.2-billion (U.S.) on a project in Mauritania, amid surging costs,, followed a day later by Barrick's $3.8-billion charge on its copper business also related to soaring costs on Zambian mines.

Europe, Japan slump
We're now more than four years removed from the spectacular collapse of Lehman Bros., but the world still remains an ugly place.

Readings of gross domestic product this week showed the euro zone still stuck in a slump, its economy contracting by 0.6 per cent in the fourth quarter of last year, marking the fifth consecutive quarter of decline, The Globe and Mail's Kevin Carmichael reports.

Troubling was that even Germany and France, the powerhouses of the 17-nation euro zone, saw their economies contract.

“We knew it wasn’t going to be pretty but this is unsettling,” said senior economist Jennifer Lee of BMO Nesbitt Burns.

“More recent data point to rebound for Germany and France in the current quarter, while Italy is in for another weak year. But today’s data will likely turn up the debate on the [euro], with France’s President Hollande already warning that France’s deficit targets will likely not be met this year.”

In Japan, the economy shrank in the fourth quarter by 0.1 per cent, less severe than in Europe, but still the third quarter in a row of declining output.

Eight things
1. Silvio Berlusconi, Italy's former-and-wannabe-again PM, on TV this week: “Bribes are a phenomenon that exists and it’s useless to deny the existence of these necessary situations. These are not crimes. We’re talking about paying a commission to someone in that country. Why, because those are the rules in that country.”

2. Tweet of the week, from @ericlamTO: "Have to figure if Mark Carney had known the papacy was available he wouldn't have taken the BOE job so quick"

3, From Reuters: Donald Trump has sued famously outspoken TV host Bill Maher, demanding the $5-million Mr. Maher offered to give to charity if Trump could prove his father is not an orangutan.

4. From The Associated Press: "Silly rabbits. The furry creatures are wreaking havoc on cars parked at Denver International Airport by eating spark plug cables and other wiring."

5. From a study in Ecology and Evolution, on the size of bird beaks: "Bill size is often viewed as a species-specific adaptation for feeding, but it sometimes varies between sexes, suggesting that sexual selection or intersexual competition may also be important. Hypotheses to explain sexual dimorphism in avian bill size include divergence in feeding niche or thermoregulatory demands, intrasexual selection based on increased competition among males, or female preference."

6. From The Atlantic: "If a meteor ever smashes into the earth, leaving the planet a dark lifeless wreck, there will still be two economists walking down a desolate post-apocalyptic Connecticut Avenue arguing about whether minimum wage laws kill jobs."

7. I got an e-mail this week from a financial adviser that said: "There's been a lot of talk lately about how everyone needs to hit a certain 'number' before they can retire comfortably - a number that is, frankly, intimidating to many Canadians. Is it true?" Um, I know this isn't what he meant, but I think mine's 75.

8. Quote of the week, from Kit Juckes, the chief of foreign exchange at Société Générale: "If it isn' a currency war, it's definitely a disagreement among friends."

From Top Business this week

ROB Insight (for subscribers)

Required reading
Canada's Commissioner for Complaints for Telecommunications Services knows what it's like to be a frustrated consumer. Read what he has to say in an interview with Rita Trichur.

Canada’s labour market has largely healed from the recession, but long-term unemployment remains a blight. Tavia Grant takes an in-depth look.

A growing number of car dealers with just one outlet are selling to big groups, which are expanding in size and clout as demands by auto makers for multimillion-dollar investments in the stores intensify and requirements for sophisticated management increase, Greg Keenan reports.

The head of U.S. drug giant Eli Lilly and Co. warns that recent Canadian court rulings favouring generic drug producers are driving his company, and the research and development jobs it provides, right out of the country, Jeff Gray and Tavia Grant report.

Canada’s largest builder of new homes is planning a major U.S. expansion, as it bets that house prices have topped out in its main market of Ontario – and have bottomed out south of the border. Tara Perkins reports.

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