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A $15/hour minimum wage is bad economics

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Halifax, 11 May 2016– Nova Scotia’s small businesses would be negatively impacted by a $15/hour minimum wage.  The Nova Scotia NDP plan would see an increase of 29 per cent to the existing minimum wage of $10.70/hour. While the NDP say their minimum wage plan helps the economy, in fact a minimum wage increase is proven to hurt youth (ages 15 to 24) employment.  A Fraser Institute report, Raising the Minimum Wage: Misguided Policy, Unintended Consequences, states that for every ten per cent increase in minimum wage there is a corresponding decrease of three to six per cent in youth employment. The NDP plan would mean a nine to 18 per cent reduction in youth employment Nova Scotia. 

“Small business owners assume all of the risk in starting a business; work very hard to start and maintain that business; and pay substantial existing costs such as taxes, electricity rates, labour costs including CPP, Employment Insurance, and Workers Compensation premiums.” said Nick Langley, Director of Provincial Affairs, Nova Scotia for CFIB. “Nova Scotia’s businesses pay some of the highest taxes in the country. Given the reality of costs entrepreneurs are faced with where does the NDP expect this increase in minimum wage to come from?” Langley added.

While media reports indicated Mr. Burrill plans to exempt small business, there are no details accompanying the amendment to the Labour Standards Act of how this would be accomplished.

It should be noted, the NDP, while in government in 2011 brought forward the current system of minimum wage increases.  Each year an independent committee comprised of labour unions and private enterprise makes a recommendation to the Minister of Labour and Advanced Education.  The increase to minimum wage is usually based upon inflation and an increase occurs once a year on April 1st.  “This appears to be a case of the NDP playing politics on good optics, but introducing bad economic policy that is out of touch with the realities of small businesses in Nova Scotia,” stated Langley. 

Labour is a significant cost pressure for many small businesses and the vast majority pay their employees above minimum wage.  However, minimum wage increases place upward pressures on all wages.  “If a business owner is paying someone $15/hour because that is what the business can afford to compensate the employee, then minimum wage is increased to $15/ hour, the pressure would be on that business owner to ensure their employee maintains the same wage difference above the minimum wage threshold.  The NDP must realize that small business owners do not have unlimited funds for labour costs and that an hourly wage increase also increases CPP, EI, and WCB contributions as well.  Business owners say that increased costs would result in a reduction of hours for employees, a reduction in the number of employees, inability to re-invest in their business, or going out of business,” said Langley.

Statistics Canada reports workers currently earning minimum wage, nearly 60 per cent are 15-24 year old students or first time employees just entering the workforce.  Only four per cent are single parents with dependent children at home.  CFIB members believe there is a better way to support low income earners. We recommend raising the Basic Personal Exemption (BPE), or the point where workers start to pay tax. At $8,481 our BPE is the second lowest in Canada. This would put more money in the pockets of Nova Scotians and protect our economy.

For further information, contact Nick Langley at 902-401-2615 or [email protected].

CFIB is Canada’s largest association of small- and medium-sized businesses with 109,000 members, 5,200 in Nova Scotia, across every sector and region.