Why Small Business is Concerned About the 15 Dollar Minimum Wage

Atlantic Canadian small business owners should start bracing themselves for the 15 dollar minimum wage campaign. The governments in Alberta and Ontario have both bought into the idea, and now British Columbia’s new ‘GreeNDP’ coalition is putting it on the table. It’s being driven principally by Canada’s largest labour unions and a coalition of the federal and provincial NDP and social activists.

Let’s be clear, the Canadian Federation of Independent Business (CFIB) is responsible for advancing the interests of our members, small- and medium-sized, independent businesses. Firms ranging in size from your mom and pop shop to companies with up to 500 employees. CFIB has led awareness on this 15 dollar minimum wage issue because these are the businesses who will suffer, shrink or die with such a sudden spike in labour costs.

Because of their size, the Loblaws, Walmart and Shoppers Drug Marts of the world will be much better positioned to absorb this shock, but make no mistake, they will also be shedding staff, cutting hours and eliminating opportunities for young, entry-level workers, who make up the vast majority of those who are earning a minimum wage.

Most CFIB members already pay well above minimum wage for employees as most small businesses understand the importance of valuing and retaining staff. CFIB certainly has no argument with improving pay and benefits for employees when appropriate and our members support these efforts.

Our argument is with a government mandated spike in the wage floor which will put the sustainability of small business in peril. Remember, this is not just about entry level workers, a 32 per cent increase in the wage floor will put enormous pressure on employers to increase the wages of all staff.

Armine Yalnizyan, a principal advocate for the 15 dollar minimum wage and an author of the Canadian Centre for Policy Alternatives’ (CCPA) Inequality Project, clearly stated this week, “Yes there will be a reduction in some hours, some jobs, some businesses. No argument there. And most vulnerable workers (teenagers and newcomers) will bite the bullet first, particularly when there’s a downturn in demand.”

Her comments are remarkable unto themselves, but I would also ask, what is the acceptable casualty rate? How many hours should be cut and how many young workers should lose their first jobs? How many businesses are they prepared to sacrifice to hit this arbitrary target?

And where will this new money for wages come from? Will it come from increased profitability? That seems unlikely in light of increased labour costs. Will it come from stronger employment? That’s not happening as, it seems everyone agrees, these higher wages will inevitably lead to reduced hours and/or job losses. Will minimum wage workers suddenly become 32 per cent more productive? Unlikely.

Finally, our region’s economy is far more fragile than Alberta, Ontario or BC. If there are politicians musing about this here, we would ask they understand the repercussions of this kind of wage spike before we even think about such a move in Atlantic Canada. We’ll have the opportunity to watch how this experiment plays out in those other province’s economies first. Fortunate for us, not so much for them.

This originally appeared in the Chronicle Herald, June 9, 2017

Nova Scotia’s pre election budget: anger and gratitude

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Nova Scotia Finance Minister Randy DeLorey looks on as Premier Stephen McNeil speaks in Nova Scotia Legislature 

Premier Stephen McNeil must be listening to Tony Robbins. One of the tenets of the motivational speaker’s philosophy is it’s impossible to be angry and grateful at the same time. McNeil’s recent budget leverages the idea in spades.

CFIB members have been lobbying for tax relief over the last four years. Finance Minister Randy DeLorey delivered one of our key asks, to raise the small business tax threshold from $350,000 to $500,000, giving small business owners the capacity to retain more money in their business to innovate and create employment. Check that box.

Additionally, we’ve been adamant about providing some relief on personal income taxes, especially so lower-income earners can keep more of their earnings.

By raising the basic personal exemption by up to $3,000 for those earning less than $75,000, many low-and-middle-income earners in the province will see more of their paycheck, a much preferable mechanism than raising the minimum wage.

As we’ve argued for years, as a poverty-reduction measure, minimum wage is ineffective because government becomes the principal beneficiary through higher taxes. With this adjustment to the basic personal exemption, thousands more lower-income Nova Scotians will pay no provincial tax at all.

Another positive benefit of the budget for small business owners is the provincial government’s measurable commitment to reduce red tape. This is a principal file for CFIB. We have been supportive of the efforts of this government to put in place the structures to begin reducing unnecessary regulatory burden. Nailing down a target of $25 million in cost to business is the right thing to do.

CFIB members will be grateful for these improvements, which may temper taxpayer anger heading into the predicted provincial election. While these measures are sensible, and should be commended, there is still much work to be done on tax reform to put Nova Scotia in a competitive position.

We remain concerned, however, about the propensity of government to create boutique programs to benefit specific sectors. While there are programs geared toward small business growth in areas such as export and innovation, historically the programs go largely unnoticed or unused.

Leaving more money in the hands of small business owners to reinvest, without forcing them through the rigours of bureaucratic process to access benefits is a far more efficient and desirable approach.

Preparing for an election, it’s not hard to see why this government has chosen the former option. It provides more control over who will be the principal beneficiaries and constituencies. That is a simple political calculation.

Many small business owners remain frustrated by high taxes and governments that seem out of touch or ambivalent to their needs. This is a good start, but it’s only a start.

It has been a very long time since the people in Nova Scotia have seen any meaningful tax relief at all. A morsel can seem like a feast for the starving. Now that the math is done in the Department of Finance, it will, presumably, be put to the people of Nova Scotia to determine if they are indeed grateful or angry.

This post originally appeared in the Chronicle Herald, April 29, 2017 on day prior to the call of the 2017 provincial election.

The $15 Minimum Wage. Good politics, bad policy

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The latest salvo in the Nova Scotia NDP’s battle back from electoral oblivion has been fired. Newly minted leader Gary Burrill is launching the Nova Scotia franchise of the “fight for 15” minimum wage war. Good politics perhaps but this is bad economic policy. This massive minimum wage hike is modelled on the Alberta government’s last election platform and has become somewhat of a Cause Célèbre for organized labour across Canada and the U.S.

The “Fight for 15” walks hand-in-hand with the discussion of the Living Wage, a somewhat arbitrary economic line-in-the-sand being drawn by anti-poverty and social activists.

In a study commissioned last year by the United Way the Living Wage for Halifax was identified by the Canadian Centre for Policy Alternatives at $20.10 per hour. This benchmark describes what the CCPA believes each money earner in a family of two parents and two school age children must earn to provide what they saw as a “reasonable quality of life”, free of the stress of financial hardship.

However the 20 dollar plus Living Wage is more a Trojan horse. Behind this is what its supporters feel is the much more “reasonable” 15 dollar minimum wage. While the Living Wage is promoted as a voluntary measure, it’s not hard to draw a line directly to the minimum wage policy discussion. The headline in the Herald last year read, Study: Minimum wage only half of what it needs to be.

The Living Wage has been officially adopted by New Westminster, British Columbia and several cities in the United States. The Mayor of Vancouver is now mulling over the idea. The outcome for city employees is nominal as the vast majority of municipal government jobs pay near or above that mark anyway. Where it is really felt is in the private sector.  As a Living Wage community, it is a requirement for private contractors also to also meet that benchmark in order to be eligible to contract with the municipality.

Unions like this policy because it drives up wages and reduces the ability of private sector contractors to compete for union jobs. It effectively increases the government employee wage floor, makes collective bargaining easier and freezes out small private contractors, a perfect union trifecta.

While this Living Wage conversation goes on, discussions around the minimum wage are ramping up in Canada with the help of Alberta`s new government. It was in the NDP platform. When the NDP swept into power, Alberta was left with a minimum wage policy that remains nothing short of horrifying for small business.

Since that time the Alberta government’s own advisors say: “it’s reasonable to assume significant job loss is one realistic possibility” and the NDP government has not produced a single economic impact analysis demonstrating otherwise. Premier Rachael Notley even admitted Alberta’s fragile economy cannot handle this shock.

Nova Scotia’s economy is certainly no more equipped to handle this kind hike and the NDP here are proposing they can meet that goal by 2018. There is no economic impact analysis. They say small business will be exempt, but no criteria is identified. How will they determine how one business must pay a $15 minimum wage and another does not? The prospect of implementing this kind of discriminatory economic policy is nightmarish.

Punishing jumps in the minimum wage mean targeted business owners will need to hike prices, lay off staff, reduce employee work hours and reduce training. Profitability will decline, reinvestments and growth in business will diminish, and jobs which may otherwise have been created will simply not appear. In other words, nothing good.

On the other hand, government will reap benefits through higher personal income and payroll tax revenues. For the low-income employee, the benefit will be marginal at best.

In fact, minimum wage earners lost more in 2015 due to higher government deductions (e.g. CPP/QPP, EI, federal and provincial taxes) compared to 2010 in all provinces and territories except Newfoundland and Labrador. For example, Alberta minimum wage earners could see their payroll deductions increase from $1,965.60 in 2010 to $5,576.22 in 2018 with the minimum wage rate increase to $15 per hour.

Minimum wage hikes are harmful to youth employment.  According to a recent report from the Fraser Institute, for every ten per cent increase in minimum wage there is a resulting decrease of youth employment by three to six per cent.  The NDP proposal of a 29 per cent to the minimum wage would mean a reduction of 9 to 18 per cent in youth employment in Nova Scotia.

The report also notes that nearly 59 per cent of people earning minimum wage are people aged 15-24 who typically are entering the workforce.  Only 2 per cent are people who are single parents who have at least one dependent living at home.

Basic Personal Exemptions 2016

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If government is looking for a policy change to help low income workers, they need look no further than the Basic Personal Exemption (BPE). This is the annual income at which a worker begins to pay taxes. Nova Scotia has the second lowest BPE is Canada at $8,481. We urge the Nova Scotia government to address this shameful statistic first before looking at reckless minimum wage hikes.

We were very pleased to see this week the Premier suggesting this is his preferred option. If so, CFIB will be looking for it in the next budget. Nova Scotians face some of the heaviest tax burden in the country. By allowing low income earners to keep more of what they earn, rather than enrich the treasury through minimum wage hikes, the government can actually do something meaningful to benefit those who need it most.