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On April 1, 2017 the minimum wage in Newfoundland and Labrador increased by 25 cents. It will increase by the same amount in October, meaning that by the end of 2017 the minimum wage in the province will be $11 per hour.
The government has been holding consultations on how best to establish future increases to the minimum wage. As part of those consultations, CFIB made a submission representing the views of business owners in the province.
Employers have been telling us that a higher minimum wage will lead to reduced hours of staff, increased prices, and a reduction in hiring, amongst other consequences. As a result of this year’s increases, annual labour costs could grow by $1,000 per employee.
|Effect of Minimum Wage Increases on Employers|
|Total Cost to Employers||$17,007.12||$22,678.14||$23,652.46||$24,674.83|
The annual minimum wage is calculated for a 40-hour work week. Canada Pension Plan contribution is equal to the employee’s contribution. The employer’s Employment Insurance contribution is calculated as 1.4 times the employee’s contribution. The workers’ compensation contribution is based on the Newfoundland Industry Classification for Food and Beverage Services for the appropriate year.
Many employers also question how much employees will benefit from minimum wage increases, versus a reduction in personal income tax rates for low-income earners.
|Effect of Minimum Wage Increases on Employees|
|Federal tax deductions||$742.56||$1,222.52||$1,183.00||$1,310.14|
|Provincial tax deductions||$772.72||$904.80||$902.46||$1,093.56|
The annual minimum wage is calculated for a 40-hour work week. The appropriate federal and provincial tax rates are applied in a given year. Canada Pension Plan contribution is 9.9 per cent of pensionable earnings, split evenly between employer and employee. The Employment Insurance contribution is determined by the appropriate rate in a given year (eg. 1.63 per cent in 2017).
Whilst proponents for a higher minimum wage argue that earning more will lead to better quality of life for employees. The evidence shows otherwise. Minimum wage earners in Newfoundland and Labrador will get an extra $700 per year from this year’s increases. Eliminating their personal income tax instead would give them an extra $1,100 per year.
CFIB makes the following recommendations: