by Andrea Bourgeois
How did you spend Canada Day? Like most New Brunswickers, you
probably celebrated and simply enjoyed all things Canadian. However, for
restaurants, pubs and other businesses in the food service industry, Canada Day
is one of the busiest times of the year.
For their employees - cooks, servers, dish washers, etc. - the
statutory holiday represents an excellent source of income, since employees are
paid time-and-a-half. A restaurant owner would pay more than $30 per hour for an
employee with some experience, when you factor in holiday pay, Employment
Insurance, CPP and Workers' Compensation premiums.
Fast forward to Canada Day 2012, minimum wage: $10 per
hour.
An experienced certified cook working on Canada Day would cost a
business upwards of $50 per hour! While this may sound like a great income
potential for employees, the reality is that there will most likely be fewer
places open on Canada Day. A typical slim two- to three-per-cent profit margin
just doesn't support such a hike in payroll.
Business owners are alarmed about the level and pace of proposed
wage increases that will see New Brunswick's minimum wage reach $10 an hour by
September 2011. One would think the government would listen to small business'
concerns, since they represent 97 per cent of all businesses in the province and
produce half of the province's wealth! Or, at the minimum, that government would
have listened to its own Minimum Wage Board, which is formed of employer and
employee representatives and which agreed to moderate increases in the minimum
wage.
But the government chose to ignore small businesses' concerns.
The solution that some government officials have offered: simply raise prices
and pass along the wage hike to consumers. Are you ready to pay about 20 per
cent more for everything you buy?
If you enjoyed a cold beer on Canada Day, would you have paid $8
a pint? If you're thinking twice about it, think about the impact this price
might have on the businesses serving it and ultimately on its employees. The
reality is that there will be fewer jobs, fewer hours and eventually fewer
independent businesses. This will mean reduced employment opportunities for the
very people the government claims to be helping - minimum wage
earners.
Supporters of minimum wage increases argue that in spite of
increased labour costs for employers, a higher minimum wage would have a
positive impact on the economy. They falsely promise that higher wages would
result in higher business revenues, because employees would have more money to
spend; higher tax revenues, because individuals would pay more tax on their
newly increased incomes; and improved living conditions for minimum wage
earners.
Economics 101 says exactly the opposite. When wages increase
faster than productivity, unemployment rises for the lower skilled, and prices
go up for everyone, undermining the initial wage increase. Wage hikes are
sustainable only if they are being driven by businesses investing in equipment
and training.
Numerous studies done by well known organizations such as the
Canadian Federation of Independent Business, the Atlantic Institute for Market
Studies, (see Minimum Wages: Operating with a blunt instrument
) the Fraser Institute and many others, prove it. As a
consequence of forced wage hikes, businesses have lower revenues because of
higher labour costs and decreased demand. Individuals have less disposable
income due to higher prices and increased income taxes. And even worse, some
individuals may have no incomes at all, due to employment cutbacks. Even
Pollyanna would figure that this could not trigger improved living
conditions.
Such large-scale minimum wage hikes force businesses to look at
ways to operate with fewer staff and make "smart equipment," such as
self-scanners and other similar technologies, look very appealing. The increase
in minimum wage is not the only factor driving the decision to replace labour
with technology, but it is one of the more significant ones.
Are you ready to buy your coffee from a vending machine? How
about an $8 pint of beer?
Here's hoping government rethinks its minimum wage hikes
soon.
Andreea Bourgeois is the Director for New Brunswick of the
Canadian Federation of Independent Business. CFIB represents 107,000 small and
medium sized business in Canada, and 4,500 in New Brunswick. She can be reached
at andbou@cfib.ca