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 email@example.com