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Minimum wage hikes are the “fast and furious” of government policy

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By Doug Bruce

In what surely must be described as a “pedal to the metal” approach to public policy, minimum wage rates in British Columbia, Alberta and Ontario are being increased at a breakneck speed with no economic impact analysis from government in sight. 

British Columbia hiked its minimum wage — previously $11.35 per hour — to $12.65 on June 1, and will continue each year until it reaches $15.20 in June 2021. Alberta has just four months to go until its minimum wage jumps by $1.40 to $15 on October 1. Ontario has already moved its minimum wage to $14 at the beginning of this year, with the current plan to hit $15 on January 1, 2019.

Too fast and furious? Comparing minimum wage changes with price inflation in BC, Alberta and Ontario can help answer this question. Inflation is a commonly used economic indicator to benchmark wages since it reflects how much an income dollar will purchase.

Looking at the accumulated changes to both inflation and the minimum wage from 2005 to 2021, the BC minimum wage will have increased at a pace of 90 per cent versus inflation at 27 per cent – 3.3 times faster.

British Columbia: Minimum Wage Hikes vs Inflation, 
accumulated % change, 2005 to 2021

British Columbia: Minimum Wage Hikes vs Inflation

The respective charts for Ontario and Alberta show a similar situation: the minimum wage in Ontario will have risen 3.6 times faster than inflation from 2005 to 2019, while in Alberta it will have increased close to 4 times more than inflation. Clearly there is no question, minimum wage hikes in these three provinces will have outpaced inflation several times over since 2005. 

Driving public policy in such a fast and furious manner is not just irresponsible, it is reckless. For starters, these three provincial governments have not publicly released any economic analysis on their aggressive minimum wage policies. What are the impacts on employment? What does it mean for employers who create entry-level jobs? And of course, what does it mean for provincial economies? 

Smaller employers are keenly aware of the impacts of increasing the cost of entry-level jobs so dramatically. Many entrepreneurs in the small business community are scrambling to cope with the speed and magnitude of the changes to their operating costs. Impacts range from forcing business owners to adopt a long list of cost cutting measures, such as eliminating entry-level jobs, reducing hours for existing staff, or forgoing expansion plans, all the way to increasing their prices. 

While big businesses have the economies of scale and power in the market to boost prices to accommodate such a large jump in costs, that is definitely not the reality for the vast majority of small and medium-sized businesses, which typically operate on razor-thin margins and in highly competitive markets. 

Reflecting on the rush to rapidly drive up the minimum wage, one must ask, at the end of it all, what has been accomplished? Where are the economic impact analyses by governments implementing such aggressive policies? What is the risk of other provinces following suit?

There is a growing list of critical questions that policy makers can no longer avoid. Until provincial governments do their homework and provide answers, they must stop being reckless and put the brakes on any more fast and furious minimum wage hikes. If they don’t, they will drive small businesses right off the cliff.

Doug Bruce is Vice-President, Research at the Canadian Federation of Independent Business.