Minimum wage increase lowers employment: CFIB

10-per-cent increase across country would lead to hiring freezes, 321,000 lost jobs
By Amanda Silliker
|Canadian HR Reporter|Last Updated: 03/14/2011

 A 10-per-cent increase in the minimum wage across all provinces could cost the economy up to 321,000 jobs, according to the Canadian Federation of Independent Business (CFIB). Using data from Statistics Canada, Minimum Wage: Reframing the debate found job losses in the form of hiring freezes, slower employment growth or direct job cuts could total anywhere from 92,300 to 321,300 jobs.

“Raising minimum wage really does, in fact, hurt the very people it’s supposed to help,” said Marilyn Braun-Pollon, CFIB vice-president for Saskatchewan and co-author of the report. “When we see large jumps in minimum wage, it forces business owners to reduce hours, reduce training or eliminate jobs.”

When minimum wage increases, business owners are faced with significant payroll costs that force them to scale back, said Braun-Pollon. An employer matches dollar for dollar an employee’s CPP contribution, pays 1.4 times the employment insurance contribution made by the employee and pays workers’ compensation based on every $100 of assessable payroll, which all increase along with the minimum wage.

“For employers, wages are the primary, but not the sole, cost of hiring,” said Braun-Pollon. “The impact of payroll taxes on even one employee can place a significant burden on employers.”

Employers may be forced to reduce hours to accommodate the increased wages and payroll taxes. Reducing hours has a huge impact on business for those in the food services industry, said Mark von Schellwitz, vice-president for Western Canada at the Canadian Restaurant and Foodservices Association, which represents 30,000 members across the country.

The accommodation and food services sector employs more low-wage workers than any other sector, with 22.5 per cent of employees earning minimum wage, said the report.

Cutting hours is especially not well-received in this industry, since servers depend on hours to boost their gratuity income, which is more lucrative than their hourly wages, said von Schellwitz.

“If we have somebody who is relying on those hours and we’re not able to provide those hours, it can lead to staff turnover,” he said. “There’s costs attached to training new people all the time and bringing them into the fold, so we want to keep our people.”

Reducing hours also decreases the level of service an organization is able to provide, so the customer suffers and that reflects poorly on the business, said von Schellwitz.

To accommodate the wage change and accompanying payroll taxes, employers may also need to cut back on training, since resources previously allocated for education and training are no longer available, found the report.

“The staff is forced to do more with less and that often means managers are doing double duty — being on the floor and managing,” said von Schellwitz. “They have less time to devote to training.”

‘Not necessarily a bad thing’

Although an increase in minimum wage may cause employers to scale back, it isn’t necessarily a bad thing, said Andrew Jackson, chief economist at the Canadian Labour Congress in Ottawa.

“One reason there might be a small reduction in hours is some employers may invest more in machinery, equipment and training to make the current workforce more productive to justify the higher wage,” he said.

Minimum wage increases can actually be beneficial to businesses, said Jackson. A lot of small businesses will set wages lower than what is in their best interest and that results in rapid turnover. A minimum wage increase will result in wages being somewhat higher — since employers often “bump up” the wages of employees when the minimum wage increases — and that will reduce worker turnover, he said.

“Employers are going to save from that in the form of lower training costs and workers will be more productive because they’re more experienced and are less likely to be looking around at other jobs,” said Jackson.

Minimum wage ranges from $8 in British Columbia to $11 in Nunavut. Most provinces have steadily increased their wages since 2001, with the exception of B.C.

As of 2009, there were 817,000 minimum wage earners in Canada, which is about 5.8 per cent of total workers in Canada, according to the report. The majority of minimum wage earners (59.3 per cent) are between the ages of 15 and 24.

The CFIB report recommends governments consider other options for providing assistance to low-income earners, as opposed to increasing the minimum wage. Governments should focus on reducing income taxes for low-wage earners and improve access to education and training opportunities through flexible training tax credits, said Braun-Pollon.

“Increasing minimum wage is a pretty blunt tool for helping low-income workers,” she said. “It’s certainly less effective than concentrating on helping people upgrade their skills to qualify for better paying positions.”

Minimum wage

Rates across Canada

Province

Minimum wage

Nunavut

$11

Ontario

$10.25

Newfoundland and Labrador

$10

Nova Scotia

$9.65

Manitoba

$9.50

Quebec

$9.50

Saskatchewan

$9.25

New Brunswick

$9 (April 1, 2011: $9.50; Sept. 1, 2011: $10)

Prince Edward Island

$9 (June 1, 2011: $9.30; Oct. 1, 2011: $9.60)

Northwest Territories

$9 (April 1, 2011: $10)

Yukon

$8.93 (April 1, 2011: $9)

Alberta

$8.80

British Columbia

$8

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