Tag Archives: Canadian federation of Independent Business

Winter is Coming

Game of Thrones

Nova Scotia’s electoral Game of Thrones is in full swing and while it may lack the dramatic flair of the HBO series, it has one thing in common, winter is coming. Unfortunately, the parties are either unaware of it or are seemingly oblivious to a stark reality.

All of the parties have launched their offensives by flinging open the doors to the treasury, each with new and creative ways to spend our tax dollars with the greatest political efficiency.

The number one priority for CFIB’s 5,200 members in Nova Scotia, consistently, is a reduction of the overall tax burden and the clearest path to this is through alignment of public sector wages and benefits to private sector norms and an overall reduction of the size of the public service. In other words, reduce the cost and the size of government.

For those who argue we have already been dealing with austerity budgets, here’s the reality. Since 2007 Nova Scotia government spending has risen from $7.3 billion to $10.5 billion, an increase of 43 per cent. Additionally, we’ve seen a whopping 22.5 per cent increase in our debt from $12.4 to $15.2 billion over the same time period. All this with an increase of only 16 per cent in the CPI (inflation) and our population flat-lining at 1.5 percent. This is not restraint and certainly not “austerity” by anyone’s definition.

Spending restraint is becoming more important than ever before. Perhaps because the weather is warming our politicians are floating sunny prognostications but there is an inevitable, relentless sociological cold front headed our way. Stretching our Game of Thrones metaphor, let’s call it “The Wall”.

According to Statistics Canada, that “wall” can be found in baseline population predictions. In 20 years, those over 65 years of age will make up fully 30 per cent of our population. A great majority of those will be out of the workforce and needing higher levels of healthcare. Keep in mind, in 2013, that same cohort made up only 17 per cent of Nova Scotia’s population.

By 2038, the forecasts indicate our median age will be nearly 50 and our overall population is expected to decline to under 934,000.

So who will carry additional tax load? If you’re a voter in your 20’s and 30’s, have a look in the mirror.

While efforts are being made to increase immigration, and claims are being made about having the largest population “ever”, the fact remains, unless we make some fundamental and dramatic changes to the way our government spends, we will be faced with some very, very difficult decisions indeed.

Absent in all of the spending promises in this election is a discussion of any long-term fiscal planning to deal with this issue. By long term, we don’t mean 4 years out, we mean 25 years out. Intergenerational forecasts which will set sustainable spending patterns.

Where are the real plans to deal with the inevitable decline in revenues from a shrinking and aging workforce? While some creative gains are being made through immigration, they are incidental and the problem is not getting people to Nova Scotia, it’s keeping them here. More than half of those who arrive leave within five years.

It’s not much wonder as we’ve been struggling with economic growth and carry the some of the highest tax burdens in the country. Our public service is nearly 5 points larger than the national average and their salaries and benefits are completely out of whack with private sector norms. Is anybody connecting the dots?

Meanwhile, the front pages are littered with political spending sprees.

Small business owners want politicians to have the courage to not just stop the bleeding, but begin to fix the problem through an actual reduction in the size of government, lowering the costs of doing business and a putting laser-like focus on better regulation and more efficient service delivery.

If not, we are sentencing our next generation to a cold, bleak future, on the other side of the wall.

This originally appeared in the Chronicle Herald, May 13, 2017

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Cap and Trade for Nova Scotia Still Fuzzy for Small Business

cap-and-trade

The Nova Scotia government’s decision to go it alone with cap-and-trade to put a price on carbon raises more questions than answers.

This spring, government released a discussion paper, looking for feedback. They gave less than a month for responses and you needed a degree in environmental science to make any sense of what was being asked.

At an information session, executive director Jason Hollett of the climate change unit tried valiantly to outline a coherent picture, but he was working within an unreasonably tight timeline and without all the tools. In spite of a commendable effort, many left the session scratching their heads. Under questioning, somewhat ominously, he referred to the scheme as “a big regulatory beast.”

Without much heavy industry, Nova Scotia has few large greenhouse gas (GHG) emitters. Our coal-burning generating stations are pumping out the lion’s share (44 per cent). The transportation industry creates 27 per cent, followed by commercial and residential heat (combined 13 per cent) and the oil and gas industry (five per cent). The remainder comes from waste, agriculture and other industry.

For years, Nova Scotians have been paying through the nose to achieve GHG reductions through transition to renewable electricity generation and efficiency. We can pat ourselves on the back. After coughing up the highest power rates in the country over the last 10 years, our renewable portfolio has grown from seven to 27 per cent, exceeding our reduction targets.

Apparently unsatisfied with this progress, the Trudeau government, riding its mandate to legislate away climatic catastrophe, told Nova Scotia to put a price on carbon by 2018 or we’ll do it for you. The McNeil government initially balked, then came up with what it felt was the best option, a go-it-alone cap-and trade-system.

Using cap and trade, the premier successfully avoided the “carbon tax” narrative, opting instead for what appears to be a more saleable version.

The proposed Nova Scotia cap-and-trade model is fairly simple, but its administration is expected to be complex and therefore, presumably, costly.

Government will cap the amount of GHGs emitted into the atmosphere, hand out free credits for that tonnage to this handful of larger polluters and they can trade among themselves. When someone needs more, they can buy in this tiny market of emitters. How that will affect price is unclear.

A central tenet of carbon pricing is revenue neutrality. But with this plan, at least for now, there is no clarity in respect to dollars changing hands or how it will affect the price of electricity or fuel. Other questions: Will the incentive to be greener simply be higher energy and transportation costs? What would be the offset?

Moving ahead without the required evidence in respect to cost and competitiveness will frustrate business owners. In spite of a stated intention by government to measure and cost all regulation prior to application, none of these calculations are yet available.

While public servants are trying to align regulations between provinces to break down trade barriers, Nova Scotia’s approach (in spite of the premier’s openness to having the other Atlantic provinces jump on board) could result in two, three or four carbon pricing schemes in the region.

cap and trade chart

CFIB members support environmental initiatives. Seventy-nine per cent believe it is possible to grow the economy and protect the environment at the same time. But 80 per cent say government must consider the cost to small business before implementing a mechanism to price carbon. That means measuring and communicating real economic costs and environmental benefits and establishing a reasonable window for consultation and implementation.

In light of the work by this government to improve the regulatory environment, introduction of a “regulatory beast” feels counter-intuitive and environmental and economic impacts are still fuzzy. For something of this size and importance to be a cost of doing business in Nova Scotia, we need clarity.

This originally appeared in the Chronicle Herald, April 26, 2017

Council candidates on a Living Wage ordinance…leaving more questions than answers.

confusion

Halifax journalist/blogger Tim Bousquet has re-opened up a particularly interesting debate during this municipal election by asking candidates for council their opinion on a living wage ordinance.

On his Halifax Examiner site, Tim is dedicating a page to a couple of questions, one of which is, “Will you support a living wage ordinance?”* Tim provides some background where he argues his position in favour of such a policy and also includes another link to material promoting the idea at Living Wage Canada. There are no counter arguments presented.

*This might be behind a paywall, so if you really want to read the responses…click here

I’ve commented about this before, but here we go again.

For anyone unfamiliar with the idea, the Living Wage for Halifax was identified by the Centre for Policy Alternatives in a report commissioned by the United Way in 2015 and set at $20.10 per hour. The study sets the wage by establishing a baseline standard of living for a family of two working parents with two school aged children.

It weighs the needs of the family to live what the CCPA considers a dignified life with opportunities for advancement. There are a great many reasons to question the methodology, but for our purposes, let’s accept the figure at face value.

Bousquet sells the idea, explaining how he is puzzled how anybody not paying employees over 20.00 per hour can “look at themselves in the mirror” and goes on to note that at his publication, the Halifax Examiner, he pays everyone a living wage.

As a small business owner, Tim’s desire to see those he employs earning a fair wage is admirable. It is also not particularly uncommon. Most small business owners try to do the same. However, many small business owners do not have the luxury of meeting an arbitrary living wage target by simply employing part-timers and freelancers on an ad hoc basis.

Employers with full-time employees base their salaries on a variety of economic factors including the industry standards, the economic value and availability of labour, revenue and business costs, the profit margin of their company, payroll taxes, benefits and a myriad of other market-driven external economic pressures beyond the employer’s control.

Living wage ordinances are nothing new. They’ve been in place in many jurisdictions in the US since the 90’s but it is difficult to compare the Canadian and US experiences as the minimum wage rates and labour standards, in most states, have historically been much lower than the levels we have in Canada.

The beachhead for these living wage policies in Canada is in British Columbia. New Westminster has had a living wage ordinance in place since 2011, followed by Port Coquitlam.

Vancouver also recently approved a plan to become a living wage employer. However, interestingly, evidence now shows almost no one will earn more under this policy. Why? Because Vancouver established much stiffer criteria around who should be paid a living wage. Among other restrictions, only contractors who have an annual service contract with the city more than $250,000 and provide regular and ongoing services on city sites fall within the scope of the city’s guidelines.

The result is the Vancouver living wage policy is little more than a feel-good, public relations campaign so politicians can say they are doing something about wage inequity or poverty.

For municipal employees and large-scale suppliers, such as is the case in Vancouver, it won’t matter a whit. The vast majority, if not all, already are making more than $20.10 per hour already. In Halifax, many make much, much more, but for smaller firms where profit margins are slim, costs continue to escalate and labour is hard to find, it would matter a great deal.

Without the sort of restrictions we’ve seen in Vancouver, a living wage ordinance would be highly discriminatory for many small businesses who want to bid on city contracts.

It is a simplistic notion to think all companies doing business with the city can set an arbitrary full-time wage floor of $41,808 annually. Adopting a municipal ordinance to enforce such a notion would be disastrous for some small firms, which as part of their business model, do business with the municipality.

What would such an ordinance mean for employers who pay their seasonal employees $15.00, $17.00, $19.00 per hour? Are they simply be disqualified from the tendering process? It stands to reason a policy of this sort would also force employers wanting to be compliant to eliminate full-time positions and replace them with temporary, contract positions to meet the $20.10 per hour threshold.

Also, how would such an ordinance be enforced? How much red tape is required? Would the city demand all businesses submit their payroll to the municipality to confirm they employees are meeting the requirement or do they just sign a declaration? Does CRA get involved? Also, how would it affect the competitive tendering process?

And what happens to employment opportunities for lower-skilled workers? Certainly, employers are not going to be providing entry level positions at that pay scale. This means employment opportunities will simply dry up for youth and entry-level employees.

There would also be job losses with larger employers.  CentrePlate has a contract with the city and provides both part-time and full-time employment. Their workforce employs many youths and other entry-level or lower-skilled workers. For some, it’s an all-important first job, for others, it’s additional household income.

If the city were to institute a living wage policy, even one with the sorts of exemptions we see in Vancouver, CentrePlate would be captured. By almost doubling the wage floor from the current minimum wage of $10.70 to $20.10, a significant labour market distortion is created. CentrePlate would then have decisions to make. They would either reduce staff, cut service or operate at a loss. What do you suppose would happen?

My guess is the more experienced workers would keep their jobs, all full-time entry level positions would be eliminated, workers hours would be reduced and service levels lowered. How exactly does this help? Would council decide to exempt Centreplate? If so, what then becomes the criteria for exemption?

A municipal living wage ordinance would also mean private sector service providers would lose competitive advantage against municipal unions, which (in case the connection is not clear) is why CUPE, Unifor, and other labour organizations are funding these Living Wage campaigns.

There could be other unintended consequences as well, including upward pressure on other salaries. If $20.10 is the new base rate, experienced employees will rightly be asking for higher levels of compensation for their work. As labour costs rise, so will inflation.

With increased costs to government, businesses would also be forced to absorb higher taxes in this equation. Along with the higher wages, there will be additional payroll taxes in higher EI and CPP contributions and additional municipal property taxes.

So the two options emerging are; adopting a living wage policy with many exemptions such as in Vancouver or; adopting a universal living wage for all municipal staff and contractors. The first option is a do-nothing, status quo, public relations exercise, the second is an arbitrary, inflationary tax grab and job killer. Take your pick.

Money obviously just doesn’t magically appear when a policy like this is adopted. For most small businesses trying to grow, there is no money tree they can harvest or a pot of unused cash to make up these wages.

I do applaud Tim and the Examiner for injecting this question into the municipal election. While we don’t agree on this, there is no doubt it will be an important public policy debate in the months and years ahead. The labour movement is plowing lots of money into this campaign and there are lots of social activists cheerleading this as a poverty reduction measure, so it isn’t going away.

For those prospective councillors who have provided answers, I would respectfully suggest it might be a good idea to go back and do a little more research and then make up your mind. From the answers I read, for many, there appears to be confusion around what is a minimum wage, a living wage and for that matter, where and how the idea is being adopted.

You can find other background material here and here. I also don’t think it’s unreasonable as citizens to expect well thought out responses to complex problems from our prospective politicians after they’ve taken the time to evaluate more than one argument.

 

Economic barbed wire

Barbed Wire

Steps are being taken by Atlantic Canadian political leaders to dismantle a virtual wall erected between provinces over more than a century.

In perhaps one of the most memorable moments of his presidency, in 1987 Ronald Reagan stood before the Brandenburg Gates in Berlin and implored Soviet Union leader Mikhail Gorbachev to “Tear down this wall!” The purpose of the speech was to compel the Soviets to submit their economy to accountability, transparency, and greater freedom. While there may be lingering questions about the impact of Reagan’s rhetorical flourish, there’s no doubt the subsequent destruction of the Berlin Wall was transformative for the European economy.
While not the magnitude of Reagan’s oratorical overture, steps are being taken by political leaders in Atlantic Canada to dismantle a virtual wall erected between provinces over more than a century by creating a new office to begin pulling apart the red tape that often acts like economic barbed wire between provinces. Mention of internal trade barriers is frequently met with confused stares. After all, there are no border guards on the Confederation Bridge or economic sanctions against the province of Nova Scotia. Our members tell us that these barriers take the more insidious form of unnecessary and burdensome regulation.
Whether due to political interference, parochial interests, or simply grown from the nature of our different bureaucratic cultures, red tape inhibits businesses that aim to work in other jurisdictions by creating a prohibitive and expensive maze of differing rules, requirements, regulations, and practices.

From a business perspective, why do New Brunswick and Nova Scotia have different requirements in fall arrest requirements when gravity appears to act with remarkable similarity in both provinces? Why would first-aid kits in each province require different contents or trucks require different wide-load signage? Some of the examples border on the ridiculous, but either by default, or in some cases by design, all of these differences add cost, drag productivity, and ultimately make things more expensive for consumers.

The recent signing of the Comprehensive Economic and Trade Agreement (CETA) with Europe further highlights the need to move on freer trade within Canada. In some cases, the new agreement means that European companies will have access to opportunities across Canada that companies in a neighbouring province or territory may not. With a more global business environment and greater opportunities for free trade, we can’t continue to ignore the impact that our own provincial differences have on our economic competitiveness.

In fact, a recent poll conducted for the Canadian Federation of Independent Business (CFIB) by Ipsos-Reid shows that the majority of working Canadians agree it’s time for premiers to work together to remove impediments to the flow of goods, services, and workers across provincial and territorial boundaries.

With that in mind, CFIB has been cheering some of the recent work being conducted by both the Council of Atlantic Premiers and the Council of the Federation to help tear down those walls. Earlier this year, Premiers Gallant and McNeil took the significant step of creating the Joint Office of Regulatory and Service Effectiveness between New Brunswick and Nova Scotia. More recently, Prince Edward Island’s Premier Wade MacLauchlan and Newfoundland and Labrador’s government are showing interest in the process.

All of the Atlantic provinces stated in January that they would create an Atlantic Red Tape Reduction Partnership that would help streamline business requirements to create a more competitive economic environment within the region. Our neighbours are important trading partners, and we encourage these bodies to set meaningful regulation reduction targets, reach them, and report publicly on their achievements.

Further to regional work, the Council of the Federation (Premiers) has also been the scene of some encouraging progress. While we’ll have to wait until next spring to see what progress is made with reforms to our main national trade agreement, the Agreement on Internal Trade, we did see a positive step with the premiers signing the Provincial–Territorial Apprentice Mobility Protocol at their recent meeting in St. John’s.

Most notable about this new mobility protocol is that it follows the principle of mutual recognition. Rather than a lengthy bureaucratic process of trying to harmonize each and every regulation across each jurisdiction, the premiers simply said, “If it’s good enough in Province A, it’s good enough for Province B.” This is the gold standard for modern trade agreements and is precisely the direction we want our governments to go when removing barriers.

While the stakes may not seem as high in Atlantic Canada as for the Soviets in 1987, reality shows that we’re facing many daunting economic challenges and unfavourable demographics. With the world of trade changing around us, it’s becoming increasingly important that we work together to break down barriers between our provinces to make the best use of our economic and human resources. If we don’t, we risk isolating ourselves behind our walls of red tape.

Jordi Morgan is the vice-president, Atlantic Canada, and Erin McGrath-Gaudet is the director, P.E.I. and intergovernmental affairs, for the Canadian Federation of Independent Business. CFIB represents the voices of 11,000 small and medium-size firms in Atlantic Canada, with 109,000 members across Canada.

This piece originally appeared in Progress 101 issue online, by subscription and on newstands across Canada

An Open Letter to Mayor and Council on the Donair Debate

KoD

October 27, 2015

Mr. Mike Savage
Mayor, Halifax Regional Municipality
Office of the Mayor
1841 Argyle Street
P.O. Box 1749
Halifax, Nova Scotia B3J 3A5

Dear Mayor Savage,

As Vice-President of the Canadian Federation of Independent Business (CFIB) which represents 1,600 small- and medium-sized employers (SMEs) in Halifax Regional Municipality (HRM), I would like to offer my input on an important decision with which you and other members of council are currently grappling.

As you know, our organization communicates our members’ municipal concerns to you frequently via meetings, reports and appearances before council. We strive to provide background on the size and importance of the small business community across Nova Scotia and we share data which we collect through carefully controlled research procedures.

Among the recommendations we have made on behalf of our membership, we have advocated for reducing municipal red tape, additional controls on municipal spending, the gap between residential and commercial property tax rates, mitigating the impact of construction projects and other issues which affect the bottom line of small and medium size businesses.

Today I’m personally asking council to examine with diligence a proposal which may have significant and long term impact on the economic and cultural success of HRM. While CFIB has not undertaken direct research to determine the percentage of support among small businesses in the city, the overarching principles of support for small business guide my comments on this matter.

In many ways, the donair is emblematic of our way forward in Nova Scotia. In its history it has incorporated elements of innovation, supported the success of our immigrant community and added value by providing employment and cultural benefits.

Through the lens of the Ivany report, we can view the donair is both an asset and an opportunity. It is about Halifax as a community, it is about the courage to take a chance, our imagination and our determination to do better. The donair as an official food is a game changer that addresses the need for a city-wide commitment to growing the economy and the population.

Also in line with Ivany recommendations, making the donair the official food of Halifax has the potential to assist in slowing our demographic decline. How many times have you heard from ex-pat Haligonians on your travels, “I need to come home so I can have a donair.”

In many ways, the donair is indeed the embodiment of the Ivany’s goals. Who in Halifax has not after an evening out on the town not been compelled by an urgent call to action and chosen to have a donair? Who at one time or another has not stepped up to the counter, looked at the kebab and said, “It’s Now or Never!”

There are a great many attributes of the donair which must be taken into consideration from the perspective of supporting small business. The donair (in its purest form) is exclusively the product of small- and medium-size business. It is affordable, requires no increase in public sector spending and is virtually free of red tape. (Hot banana peppers should never be confused for red tape.)

Since the early 1970’s, Halifax has been the epicentre of this growing culinary phenomenon. One important small business played a critical role in the establishment of the donair as a staple in the Haligonian diet. My first exposure to a donair was in 1977 when, as a student in broadcasting school, the donair was my primary source of sustenance for well over 8 months. Every day before heading off to learn my trade, I would stop in at King of Donair on Quinpool Road and spend, as I recall under $3.00 for a single donair with hot peppers, parsley and a squeeze of lemon washed down by an ice cold Brio Chinotto. (Totally old school).

How many others, like me, were convinced to stay here in Nova Scotia and help build the economy as the result of having access to a cultural and culinary resource unavailable at the time in other parts of the country?

The Lebanese community has added a great many economic assets to our community and many of these were precipitated on the economic foundation provided by their culinary heritage. In recognition of their commitment and the commitment of all small business to the growth of our community and province, I provide my full support to the consideration of the donair as the official food of Halifax.

Jordi Morgan
VP Atlantic

cc:
Norman Nahas,
President,
Canadian Lebanese Chamber of Commerce and Industry

Embedding Entrepreneurship in Our Education Culture

Coding_Children_Blog
We may be witness to a tectonic shift at the Department of Education and small business should be pleased. Recognition is finally being given to the Ivany suggestion that for far too long Nova Scotia’s schools have valued raising public servants rather than entrepreneurs. The result of this refreshing direction of thinking is the inclusion of the voice of the business community in the P-12 education system.

The shift in thinking also seems to have been ignited by the shockingly dismal statistic that only 12 per cent of Nova Scotia’s students envision themselves as future entrepreneurs.

This fall, the department will create a Business-Education Council. It is, in the words of the action plan, “a forum where business can identify the skills and attributes students need to be successful, create a database of entrepreneurs to serve as mentors, support teachers’ awareness of economic growth sectors and the importance of developing entrepreneurial skills across the curriculum.” Bravo. It’s about time.

There are a variety of other positives in this initiative including expanding the delivery of Junior Achievement and embedding and updating entrepreneurship courses. CFIB is hopeful Nova Scotia’s entrepreneurs will find time to contribute to this opportunity.

In recent surveys, CFIB members are expressing dismay with the qualifications of young people who are coming into the workforce poorly prepared for real world challenges. Many business owners tell us they find both the quality of applicants and the work ethic of new hires have deteriorated in recent years, particularly when recruiting for entry-level jobs. There are also serious gaps in finding workers for higher skilled jobs resulting from disconnects in our education system.

For example, when the shipbuilding contract was awarded, the department was quick to highlight the creation of training programs to fill what was seen as an immediate need for welders, pipe-fitters, electricians, etc. While these are useful and praiseworthy trades, the glaring omission was the tremendous opportunity the shipbuilding contract offers in the Information and Communication Technology (ICT) sector.

Naval warships are second only to spacecraft in the advancement of technological innovation. Most of our computing advances of the 20th century are rooted in NASA and military applications. Along with biotech and other digital start up opportunities, Nova Scotia is poised to become an epicenter not just corporate development, but also growth of small and medium-size businesses in ICT.

So it is good news to see the Minister announcing that coding will finally be introduced in Nova Scotia classrooms next year. Until this week`s announcement, coding and computational thinking has been largely absent from our school curriculums. Yes, children must be given a strong, broad based education in the early years focused on numeracy and literacy, but options must be available as they progress through late elementary and junior high to understand code, the working language of the tech sector. It’s great to teach Gaelic, but C++, Java and Python may be a tad more useful in the workplace of the 21st century. Pardon the pun, but it’s about time we got with the program.

Imagine if we are able to create an education system where other western school systems look for best practices in ICT education, where learning about the development of ICT is as important as using it, where parents wish to immigrate to educate their children in these areas and where businesses want to locate because of the base of ICT talent.

There are other positive signs. Spurred by private sector investors and supported by the province, Brilliant Labs is establishing spaces where young children can grasp the fundamentals of technology and design through interactive workshops. Acadia University’s high school robotics competition could also be a game-changer, but the fact remains, beyond bringing in IBM and Google consultants to orient existing teachers, there is a need for systemic change to grow our capacity to teach coding, CS and entrepreneurship.

Acadia University’s Master’s level teaching programs is producing a very small stream of new teachers who have a background in CS. For this to be successful however, we need the department of education to do what it must to keep these teachers in Nova Scotia. That means plans to create teaching positions for those who are qualified to instill not just the spirit but also the competencies of entrepreneurship in our next generation.

There are tremendous opportunities for contributing to society and personal success available through entrepreneurship and CFIB is delighted the Department of Education has identified this as a priority. We wholeheartedly support the establishment of the Business-Education Council.

Let’s hope this government’s action plan takes root in the department. Let’s also hope along with public service and personal growth, innovation, the development of a strong work ethic, creation of personal wealth and local economic prosperity are also seen, as they are by entrepreneurs, as important measures of success.

This blog post also appeared in the online version of the Halifax Chronicle Herald on October 24th, 2015

What Will a Liberal Majority Mean for Small Business?

justin-trudeau-sept-21-2

October 18th to 24th is Small Business Week in Canada. Every year, organizations across the country mark the importance of entrepreneurship to our economy. This year Small Business Week was kicked off with a wholesale change of government and there was lots of talk about small business during the campaign.

The health of the small business sector is critical to the economic success of the country. The Canadian Federation of Independent Business (CFIB) is proud to provide a strong voice for our 109,000 members to ensure their opinions are heard when politicians are making decisions.

So what does this Liberal majority mean for small business? There is both good news and some cause for concern. During the campaign, the Liberals committed to reducing the small business tax rate to 9% by 2019 and to reducing employer Employment Insurance (EI) premiums from $2.63 to approximately $2.31 in 2017. We also like Justin Trudeau’s plan to waive EI premiums for new jobs for young people for the next three years. This will certainly encourage hiring in a segment of the population that can use a leg up.

The Liberals have also promised to maintain the Canada Job Grant while reinstating the federal-provincial Labour Market Development Agreements. According to their platform this will provide the provinces and territories with half a billion dollars per year in skills training. CFIB also supported two recent Liberal MP Private Members Bills including Emmaneul Dubourg’s bill to allow small business owners to pass their business to their children free of capital gains and Ted Hsu’s bill to bring back the long-form census.

These are all good measures.

On the other hand, there were a couple of red flags. The comment made by Mr. Trudeau suggesting a large percentage of small firms are used as tax-shelters requires clarification. The vast majority of small firms are legitimately using the small business deduction. If Mr. Trudeau was talking about ensuring that the deduction is not being abused, we can support that position. If there is a move to limit access to the small business deduction, as is taking place in Quebec, CFIB will raise strong opposition.

CFIB is also concerned about the Liberal plans to increase CPP premiums. We will be asking the new government to put this idea on hold until the economy is in better shape. Because CPP premiums act as a tax on every dollar a business pays to its employees, it is a big disincentive to hiring at a time when the economy needs just the opposite. CPP expansion is currently our members’ number one area of concern and we will be reaching out to learn more about the Liberals’ plans.

We are hopeful this new government will take note of our members concerns. Most have a direct impact on the bottom line of small firms and in turn the success of the Canadians who run them and are employed by them.

Now, with the election behind us, this week we want to focus attention on the importance of small business to our communities. On October 24th, CFIB is sponsoring Small Business Saturday to encourage the community to recognize the contribution of our local entrepreneurs by making a conscious choice to support local business.

We are asking you to take some time this Saturday to cast a vote for small business in your neighbourhood. Drop in for a meal, listen to some music, purchase a gift, get some groceries, have your hair done, drop off the dog for grooming or pick up that item you need for your home.

By supporting small business in your area, you are supporting your family, friends and neighbours. These are the same folks who often sponsor your kid’s sports teams, local cultural events and community projects.

At CFIB we believe small business makes Canada a better place. We hope this Saturday you’ll make your part of Canada a better place for small business.

More than 140 Characters on the United Way, the Living Wage and Minimum Wage

scrooge mcduck

The “Living Wage” is an interesting term. To its credit, the Canadian Center for Ethics in Public Policy were gracious enough to invite the opinion of CFIB members to a forum tonight to discuss a recent report commissioned by the United Way of Halifax and executed by the Canadian Centre for Policy Alternatives (CCPA).

The United Way is a well know charity aggregation which provides its charitable clients organization and communication expertise. They have been great contributors to the social fabric of communities across Canada raising money for important organizations and projects.

Many small and medium size businesses contribute generously to the United Way as an effective method to give back to their community. CFIB has been a strong supporter of the United Way in years past as have individual CFIB members. The United Way has had many profoundly positive impacts on our community over the years and continues to play a valuable role. However, good works should not and do not inoculate any organization from scrutiny.

The Catholic Church has also effected many great works of charity, it is useful however from time to time that it should  be questioned on its social positions or associations. Agree or disagree, we live in a society where organizations that receive public funding should be held to account by the public at large. Such as it is with the Catholic Church and so should it be with the United Way.

This week, CFIB’s President Dan Kelly and I both came under fire for some comments around the United Way’s partnership with the CCPA. Over the weekend, I had made some rather benign comments about the CCPA’s living wage report stating that, as a voluntary measure, CFIB didn’t have many concerns about the identification of a pay scale predetermining a living standard, however arbitrary the methodology, provided it was voluntary.

I also cautioned that $20+ shouldn’t be used as a benchmark for the minimum wage discussion. Dan then weighed in on Monday on Twitter questioning the United Way’s association with the CCPA….and off we went.

There was an ensuing kerfuffle in the media as News 95.7’s Rick Howe and Sheldon MacLeod and the CBC threw a little gas on the fire. This was followed by the usual assortment of anonymousTwitter trolls and labour activists weighing in accusing CFIB of everything from calling for a “boycott” of the United Way to “h8ing” the poor. Neither of which are true but such is the level of debate on Twitter. (I did find one post amusing however which pointed out I was “too busy” to engage in this Twitter nonsense because as an advocate for small business I was swimming around in treasure like Scrooge McDuck…see above.)

Sue LaPierre, director of strategies and partnerships with United Way, told the CBC that their involvement in the study isn’t political, and is simply a tool to help them reduce poverty in the community. She said, “We certainly have not begun to advocate for small businesses or any businesses to pay a living wage…What we advocate for is a good quality of life for our citizens.”

It seems somewhat naive to believe that spending $23,000 to hire and work with a group that is both funded by, and an advocate for, big labour organizations (and by extension their political positions) would not be viewed by some as being a tad “political”. For example, had the United Way commissioned a Living Wage study by the Fraser Institute on the impact of a living wage, one can only imagine the hue and cry emerging from the so-called “progressives”.

But to the matter at hand, a living wage.  If a firm has the capacity to pay this $20.26 per hour “living wage” and sees the advantage of voluntarily doing so relative to employee retention, productivity and other metrics, then it should indeed do so.

That isn’t the point.

The living wage campaign is not simply an academic exercise or a “discussion starter”. It is clearly constructed to set a benchmark for legislators to increase wage floors and minimum wage levels and has been used to that effect in other jurisdictions. The city of New Westminster, British Columbia has adopted a living wage ordinance and you can rest assured the $15.00 minimum wage being implemented by the new government in Alberta was not a number picked out of thin air.

If the United Way of Halifax does not believe the living wage is connected to the minimum wage debate, it need only examine the Living Wage Canada: Call to Action. The two are inextricably linked and evidence is put forth to not only establish a living wage but to also pressure government to increase minimum wages. They might also note organized labour’s participation in the campaign and the “debunking” of myths around minimum wage and small business.

Our 5,200 members in Nova Scotia and 109,000 across the country, all of which are small independent businesses, do their best to offer competitive wages that will help them attract and retain valued staff. They have a serious issue with escalating minimum wage floors across the country and CFIB as an organization has the responsibility, as seemingly their only voice on this issue, to articulate their concern.

Several years ago CFIB’s report Minimum Wage: Reframing the Debate examined the compounding impact minimum wage increases have had in this current context. Most alarming is the revelation that minimum wage increases actually hurt the very people they are intended to help: low-skilled and low-income Nova Scotians.

As outlined in the report by Nova Scotia’s Minimum Wage Review Committee, CFIB’s research also finds that most minimum wage earners are young, live with family members, and are not from low-income households. In other words, increases in minimum wage do little to reduce poverty because, as with most blunt instruments, it does not have the ability or flexibility to zero in on the appropriate population.

In spite of the CCPA’s assertions to the contrary, there are volumes of data and decades of research which indicate minimum wage increases do have serious and unintended consequences: job losses.

CFIB’s latest figures based on the 2014 Labour Force Survey estimates that in Nova Scotia anywhere between 1,800 and 8,000 jobs have been lost with every 10 per cent increase in minimum wage. These job losses have taken the form of hiring freezes (jobs that would have been filled but were not), slower employment growth, or direct job cuts during an economic downturn…mostly in the cohort of workers 25 to 54 years of age since the negative employment impact applies to the bulk of the working population.

This data is supported by what we hear from our members every day, businesses that have to cutback staff, hours or training to offset costs due to ongoing wage pressures. Of course, the impact of minimum wage increases go beyond job losses as they also significantly increase payroll costs in a firm. Employers often feel pressure to increase the wages of all employees when the minimum wage goes up.

Additionally, with any increase in payroll comes an increase in payroll taxes, including Canada Pension Plan (CPP) contributions, Workers’ Compensation and Employment Insurance premiums. Payroll taxes are the most detrimental tax to businesses as they are profit insensitive – they do not adjust based on corporate or personal income growth, as corporate and personal income taxes do. Consequently, payroll taxes are widely viewed as an enemy of job creation.

While CFIB is not discouraging employers from deploying a voluntary living wage, we are deeply concerned this campaign will have an impact on provincial legislators who may look to the living wage benchmark when considering minimum wage.

Minimum wage is clearly meant for entry level positions, usually for young workers entering the workforce. Our research shows that only 6.8% of workers in Nova Scotia earn minimum wage and of those nearly 60% are between the ages of 15 to 24. Only 40% of those are full time jobs and a majority do not belong to poor households, live with their parents or family members, are not primary income earners and 47% leave their job within a year.

At CFIB we believe it is our responsibility to point out alternatives.Our reports on minimum wage are designed to do this. For years, CFIB has been urging government to improve the income position of all Nova Scotians, particularly low-income earners, through the tax system. New figures show the combined federal and provincial tax-take of Nova Scotia’s minimum wage earners is the fourth highest in the country.

Low levels of basic personal and spousal exemptions, combined with a personal income tax system that is not indexed to inflation (though the minimum wage is), regressive consumption taxes and disincentives to economic growth are the culprits. CFIB also believes it is simply unacceptable, and in many ways unethical, for government to benefit from minimum wage increases through increased tax revenues.

While little research is available in Canada – as only New Westminster has adopted living wage legislation in 2011 – there is research from the United States that shows that living wage laws, like minimum wage legislation, typically lead to fewer job opportunities for lower-skilled workers and spite of what its advocates are claiming, they don’t in fact help poor families escape the cycle of poverty. Additionally, there is a potential for living wage laws to inflate municipal budgets through higher costs for public services and to reduce the efficiency of local government.

Loath as I am to attribute motivation to any group, one must look at why this idea is being pushed forward by activists fronting for organized labour. It doesn’t take too much sleuthing to join the dots. Reviews of municipal US living wage policy however, have shown that because many living wage employers end up being large firms dealing with government, the institution of living wage policy acts to reduce or eliminate incentives for governments to contract out work done by public sector unions. In turn this increases unions bargaining power, raising wages of their members. Altruism indeed.

As for the United Way, saying they simply want to have “the discussion” about a living wage feels a bit disingenuous, especially in light of the fact that simply Googling “United Way” and “Living Wage” turns up lots of associated reading material. There is ample existing evidence available for the United Way to make a determination of whether or not it should support a living wage in Halifax.

If the United Way believes in using a living wage as a benchmark for paying its employees, it has every right to do so. However, if the United Way supports a living wage as a public policy initiative, then it should also say so. By paying $23,000 of its benefactors contributions to the CCPA, which does advocate for higher minimum wages through their living wage campaign, the United Way must surely must take some responsibility for advancing this ideology.

It may not seem like political advocacy to the folks at the United Way…but from this perch, it’s pretty close.

CFIB is simply pointing out, with the utmost respect, that if the United Way of Halifax is going to use its name to advance this campaign, it should understand there are a great many small business owners, contributors to the United Way, who may vigorously disagree with their position and they may choose not to want their contribution used to advance this policy.

Small business owners also want to help the working poor succeed – and contribute mightily to doing so in many ways. At the same time there are many small business owners who simply hold differing views on how to do so.

Rethinking the “bank of Nova Scotia”…a step in the right direction.

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As witnessed on Thursday by the Finance Minister Diana Whalen’s fiscal update, the government’s financial picture is troubling. The deficit is at $680 million for 2013-14, the net debt sits at an all-time high nudging 15 billion, total revenue down $340 million from last year and department spending has grown by $70 million.

 A declining, aging workforce is a rock; a tax regime imposing punishingly high rates on the population to maintain service levels is a hard place. Premier Stephen McNeil and his Finance Minister clearly are in-between with some tough choices ahead, but it’s time to make them.

Two weeks ago, Michel Samson, the Minister of Economic and Rural Development and Tourism quietly announced a realignment of responsibilities in the distribution of public money to the private sector.

Nova Scotia Business Inc. will now be handling business development and delivering assistance programs including the Capital Investment Rebate and the Small Business Development Program taking crucial decision making power off the cabinet table. 

Eligibility requirement will be more stringent to ensure there are adequate levels of private sector money out of the gate and funding will be tied to economic principle such as productivity improvements, competitiveness and innovation. These are all commendable and sensible moves by this government.

The positive news in this is the apparent de-politicization of decision making when public money is handed over to private business as investment. This should be welcomed as an important step in the right direction.

But there is a glaring irony. The headline stated “the private sector would lead economic growth” and subsequently announced the arms-length government agencies that would now be responsible for doling out public money in the form of loans, grants, payroll rebates and subsidies.

While this new structure under the guidance of NSBI is immeasurably more sensible than elected officials picking winners and losers at the cabinet table, it does not address the underlying problem of luring business growth through artificial, government subsidized competitive advantages.

Year after year, in CFIB pre-budget surveys, Nova Scotia small and medium size businesses have stated emphatically that assistance to business should be broad-based tax relief and elimination of unnecessary regulatory burden or red tape.

While this new direction is encouraging, it is treating a symptom, not the disease. Reliance on government hand-outs has grown not because business can’t survive on their own but because when one business is given an artificial, temporary, competitive advantage other businesses are naturally going to look to government for similar treatment.

If this government truly wants to address this addiction it must start the process of weaning businesses off government assistance programs and create a truly level playing field with incentives for the investment of more private capital, broad based tax relief and sensible, clear regulation.   

The tax and regulatory review being conducted now is a tremendous opportunity to effect meaningful change to the tax code to achieve these goals and set the province in a better direction. It will take courage and vision. The same courage and vision demonstrated by every entrepreneur starting up a small business.

Building a CASL in the air

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Building a “castle in the air” is an idiom used to describe daydreaming or making plans that won’t come true. In many ways Canada’s Anti-Spam Law (CASL), the heterographic acronym, is equally a flight of imagination and an anachronistic one to boot.

Don’t get me wrong, I hate getting unwanted spam as much as all my Facebook pals, but if the solution becomes more difficult to manage than the problem, there’s something wrong.

The genesis of CASL was the creation of the federal government’s Task Force on Spam. About 10 years ago, spurred on by public complaints, the feds began looking around to see how Canada and other countries were managing this growing public irritant. Four years later CASL was first introduced in 2009 and re-introduce in 2010. The bill addresses the legislative recommendations which were designed to address concerns identified by consumers, academics and industry.

Bill C-28 received unanimous support in the House of Commons in 2010 and in December the government announced the law would come into force July 1st 2014, a decade after its inception.

Think back 10 years ago, Blackberry had only a million subscribers world-wide, an Android was still only a character from science fiction, folks were still using Windows 98, XP if they were lucky and Vista if they were on the cutting-edge. In 2005 there was no such thing as a MacBook, at least not one you could buy in a store and Nortel was still smouldering.

Suffice to say, thing have changed in the past decade. Unfortunately, our legislative process runs at glacial speeds. The public demand for anti-spam legislation has also waned considerably since, because technology has largely addressed the problem and if spam isn’t already squeezed out by highly effective spam filters, most people have been able to manage with some rudimentary knowledge of how to cope with it. Select, delete, repeat.

So here we are in 2014 with a law that is little more than an outdated and dangerous intervention on freedom of commerce and freedom of speech. CASL targets any electronic communication known as a Commercial Electronic Message, or CEM that could be considered to “encourage participation in a commercial activity” in any way.

Think about this for a moment. With a definition this vague, the law could potentially target any email, text message or SMS sent by a business. Period.

So, here’s where the rubber meets the road. Either someone has given you the specific authorization to send them a CEM, express consent, or you have implied consent, which is based on an existing business or non-business relationship, or personal relationship.

Express consents do not expire, unless of course the recipient has withdrawn it. Implied consent lasts two years. Consent must be “opt-in”. That means you must actively subscribe to receive a communication.

There is also a B2B (Business-to-business) exemption for existing business relationships. This is essentially any situation where a transaction occurred between two companies in the past two years. CASL also allows CEMs to be sent to relevant “conspicuously published email addresses”, such as email addresses on business websites or on other public sites, without a statement that they do not want unsolicited emails. Huh?

Does that mean bots can still harvest emails from staff directories on company websites? The CRTC says, go talk to your lawyer. There is also a 3-year transition period for businesses to get consents for companies that have an existing business relationship with their clients, essentially to go from implied consent to express consent. Another trip to the lawyer.

All CEMs will need to contain “prescribed information” on the identity of the sender of the email and marketing firm if applicable. CEMs will also have to include an easily-accessible and cost-free unsubscribe mechanism. That’s why you are getting all these emails lately asking if you want to continue to subscribe to the newsletter or communication you probably had to subscribe to in the first place. All the rest can be found in your spam bin, social media filter or if you use Gmail, your update list. (Thank you, my Google).

Here’s where it gets ugly, record keeping and penalties. The onus is on the sender to prove they have consent to send a CEM. That means businesses will need to keep records of express and implied consents, with date and time, type and expiry date of the consent. Interestingly, and apparently something the authors of the bill were oblivious to, this is going to be a significant cost to business.

Smaller businesses without dedicated CRM staff and in-house lawyers, will be writing many more cheques to make this happen. I have noticed there are some new software solutions being developed for the business to track CASL compliance, presumably these are not free.

Although the government insists it will only go after the “worst offenders”. There are fines of $1 million up to $10 million dollars for extreme cases, with a “Private right of action” clause in effect in July 2017. While CFIB doesn’t realistically think the fines will be levied on any significant segment of small business, the question remains…what’s with that!? Why not 10 billion dollars?

These Administrative Monetary Penalties (AMPs) which can be levied without resorting to criminal charges, combined with the bill’s extremely vague and confusing language, have pushed many very small businesses to seek out new customers by phone and letter-mail rather than electronic messaging. So there are folks who are happy, namely telcos and our friends at Canada Post.

For those worried about carrying on normal business activities, some exemptions exist for specific situations, such as: quotes, estimates or enquiries; warranty and safety recall information and other information about ongoing use of a product or service; employment and benefit information, etc.

Oh and political parties and government are also exempt. Go figure.

For its part CFIB has been busy on this file. We’ve made two separate submissions to Industry Canada (IC) and CRTC on the bill and another when it was C-27 in 2009. We had a significant role in business coalition submissions to IC and CRTC, and was part of in-person consultation meetings with CRTC officials.

We’ve specifically raised problems with CASL in meetings with PMO, successive Ministers of Industry and Treasury Board and met personally with CRTC’s CASL regulatory team and Industry Canada officials tasked with putting the legislation and regulations together.

In the first version of the bill and regulations, referrals to new clients were essentially impossible. Continued CFIB lobbying managed to change the regulations so that one message from a referral to a prospective client is allowable.

We received frequent calls from Industry Canada as they were revising the regulations to say that they had taken our letters’ overall message into account. Those led to some smaller changes, such as more flexibility in listing the prescribed information in each CEM and the above changes to referrals.

So here’s the advice CFIB is giving to members. Get your explicit “consents” now, change your emails to include necessary information and set up some form of record keeping. Yes it’s easier said than done but the cost of the alternative is a heavy one. Not to speak of potential reputation costs and issues of public trust and loyalty. Who wants to be known as a “spammer”?

Some tips from CFIB

Perhaps most irritating is the speed of the legislative process has produced a law that governs problems which have largely already been dealt with through better technology. The law has left large companies spending millions and small business struggling to make sense of how to comply and asking why it is even needed.

While business in Canada struggles to comply with this new batch of red tape, there is a danger offshore companies, especially software developers, may simply take Canada out of the loop rather than making the effort to comply.

There is still so much uncertainty and vagueness around CASL compliance may end up being determined on a case-by-case basis. You can guess who will be paying the bill for that while the true spammers will simply continue to try to hide from the regulators.

This government has said it is doing everything it can to help small business. Here’s another instance of the most frightening words an entrepreneur can hear are, “Hi! We’re from the government and we’re here to help you.”

If you managed to get through this lengthy post and find yourself completely irritated by all of this, here is a brief respite from your angst…