Minimum wage increases tend to hurt the very people they are supposed to help, as large increases force business owners to reduce hours, reduce training or even eliminate jobs, according to a new report.
The Canadian Federation of Independent Business (CFIB) report Minimum Wage: Reframing the Debate, found a 10-per-cent increase in the minimum wage across all provinces would cost up to 321,300 jobs. These job losses would take the form of hiring freezes, slower employment growth, or direct job cuts during economic downturns.
"At a time when the economy is in slow recovery, the last thing governments should be considering are policies that further hinder job creation," said Marilyn Braun-Pollon, Saskatchewan vice-president at CFIB and co-author of the report.
Minimum wage rates currently range from $8 an hour in British Columbia to $11 an hour in Nunavut. Since 2001, most provinces have substantially increased their minimum wage rates. British Columbia is the only province that has not increased its minimum wage since 2001.
Far from achieving the government's stated aim of poverty reduction, minimum wage increases can significantly add to the payroll costs small firms are already forced to pay, leaving employers with no choice but to scale back, stated the report.
"Governments should consider all other alternatives in place of minimum wage increases so that small businesses' ability to create jobs is not compromised. It's time provincial governments are held accountable for the ineffectiveness of their minimum wage policies," said Braun-Pollon.
The report calls for governments to focus on more practical and effective ways to help low income earners, such as providing additional income tax relief and training opportunities.
"Small businesses want to ensure employees are able to keep more of their income and are able to upgrade their skills for better paying positions. It's time to reframe the debate," said Braun-Pollon.
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