Fair Wage Commission Presentation

The Coalition of BC Businesses is an association of 13 small and medium sized business associations spanning 13 distinct industries in the province.  Collectively the Coalition represents approximately 50,000 small and medium sized businesses, which equates to approximately 500,000 employees.  The Coalition was founded in 1992 and its primary focus is labour and employment policy.

Minimum wage is an issue that the Coalition has worked on for many years. Members of the Coalition are concerned about the potential impact on businesses of increasing minimum wage rapidly or in irregular increments.  British Columbia is fortunate that there have been other jurisdictions that have moved towards large rapid increases that we can learn from. Recent examples in Alberta, Ontario and our neighbours to the south in Seattle have clearly shown that large, rapid increases in minimum wage actually have a negative effect.

A recent study by the CD Howe institute found that in Alberta, minimum wage increases have led to job losses.

“Now that two of the minimum wage increases have already taken place, a quick look at the present and previous job numbers can be quite illuminating. From April 2015 to April 2017, the number of employed individuals aged 15-24 in Alberta has dropped from 326,300 to 298,600, meaning that 27,700 of these individuals have already lost their jobs.”
(P.7, CD Howe commentary 491)

Minimum wage increases are also taking place in Ontario.  The Canadian Center for Economic Analysis has concluded:

“Our risk assessment of the Act is that there is more risk than reward for Ontarians despite the stated goal of the legislation in helping Ontario’s more vulnerable and the Ontario economy,” (Paul Smetanin, President of CANCEA).

The Ontario Financial Accountability Office publicly warned that the province’s proposed minimum wage increase to $15 an hour could wind up resulting in an estimated net loss of 50,000 jobs. Furthermore:

“The FAO also said in its report that boosting the minimum wage is not an effective way to alleviate poverty.”

In Seattle similar issues have become apparent:

“The costs to low-wage workers in Seattle outweighed the benefits by a ratio of three to one,” according to a study, conducted by a group of economists at the University of Washington and published by the National Bureau of Economic Research.

“On the whole, the study estimates, the average low-wage worker in the city lost $125 a month because of the hike in the minimum.”

The root of the problem is that large and rapid increases are difficult for businesses to absorb.  Business need time to be able to absorb increases.  Many businesses (especially those in the food services and retail industries) have very slim profit margins.  There is a tipping point where the cost of doing business will out weigh the benefit of doing business.

Rapid and large increases will harm small businesses, potentially causing businesses to:

  • reduce hours,
  • lay off employees or
  • increase the cost of goods and services.
  • Ultimately, they could even close.

Minimum wage is intended to be a starting point for people to get work experience or to supplement other incomes.  It is intended to get students into the workforce, and to introduce them to the tools they will need to become successful in their careers.  Often retiree’s will take minimum wage jobs to supplement their income and also to keep active in their communities.  In fact, according to provincial study statistics, of the 93,800 people earning minimum wage in 2016, 68% fall into these categories alone.

The question has to be asked, what is the intent behind raising minimum wage?  We are told by proponents of increases that it is to “lift low income earners out of poverty”.  This is commendable, but increasing minimum wage is not the best path to success.  Study after study has shown that raising minimum wage can actually have a negative effect, especially to those with low skill levels or those who are trying to get experience in their industry of choice.

Dr. Joseph Marchand, University of Alberta Study

There are many better tools that government can use to give low earners a helping hand.  Provincial statistics show that 6% of minimum wage earners are defined as “head of a family with no spouse present”.  These are the people that need a lift.  This group needs to be studied, the question “Why?” needs to be answered and changes need to be made to help them get skills or training.

The Coalition is advocating that at the very least, before minimum wages are increased, that “real” low earners are given opportunities to learn and grow.

Specifically, the Coalition encourages that you look at other options:

For the 6% of minimum wage earners (classified as “heads of households”) who do rely on minimum wage income, government should investigate better ways to improve take home pay such as:

  • Study this group to find out why they remain on minimum wage
  • Identify barriers that need to be overcome (language, disabilities, transportation, childcare/day care etc.)
  • Increase skills training and offer incentives to unskilled workers to get training (especially in sectors that are facing labour shortages) and
  • Increasing the basic BC income tax exemption (currently $19,749 and something that Government could do without impacting the provinces economic driver’s, aka: small & medium businesses.)

 

The Coalitions of BC Businesses recommendations:

Go forward slowly.

The Canadian Center for Economic Analysis study clearly reveals that if Government (in Ontario) were to do nothing other than implement the minimum wage increase over five years instead of in the next 15 months, jobs at risk would decrease by 74 per cent in the first two years.

The lesson from this is clear: spread out any increases over a period of years.

The Coalition recommends that if the minimum wage is going to be raised to $15 an hour, this is done in the following manner:

  • Predictable, affordable increases.
  • $.75 per year maximum is a tolerable annual increase in the current economic climate
  • 5 annual increases of $.75 would get minimum wage to $15.10 by 2022
  • This would still be a 7% increase, over 3 times higher than the rate of inflation.
  • This would allow businesses to plan, adapt and adjust to changes
  • There should only be one increase per year
  • The increase should be in the early fall (September 15th has worked well so far)
  • Depoliticize the process
  • Put a plan in place that everyone knows and can work with, that will not be altered
  • Once $15 is achieved, the Coalition would like to see further annual increases to be tied to CPI as was previously intended

 

Liquor differential changes:

Some Coalition Members are in the food and liquor service industry.  I believe that they have or will also be presenting to this commission. I want to point out that many of their employees receive gratuity (tips) in addition to their base pay.  Often these tips greatly enhance the servers take home pay.  Noted by Massaow and McAdams, the average tip/hour for all servers in Canada is approximately $17.  This method is working, please don’t change it.