Small business has concerns about increase to minimum wage

Assurance needed on “predictability”

St. John’s, February 20, 2018 – Today, the Government of Newfoundland and Labrador announced changes in the minimum wage, which will increase based on National Consumer Price Index. The Canadian Federation of Independent Business is concerned that the model announced today will not result in the predictability the government claims and there is no recognition of the growing cost of doing business in Newfoundland and Labrador. A bi-annual review of the minimum wage regime is still in place and there are no offsets provided, contrary to CFIB’s recommendations. 

“The announcement made today is about politics and not reflective of the economics of Newfoundland and Labrador,” stated Vaughn Hammond, Director of Provincial Affairs in Newfoundland and Labrador. “Without a legislative change eliminating the two-year review, small business owners should not take comfort in the notion that minimum wage will increase by inflation in the future. It is simply too easy for government to make any decisions they want, including a path to $15 an hour.”

In 2010, minimum wage workers represented 11 per cent of the workforce and, by 2016, it declined to nearly 6 per cent. There has been improvement and yet the government sees fit to increase the minimum wage, despite there being other options available. For context, in 2017, using the Low Income Tax Reduction Program, a minimum wage worker would have received nearly $1,100 per year and small business owners would not have to incur a labour increase of $1,000 per employee (see tables below).

“Operating a business in the last couple of years has grown increasingly difficult as revenues for many businesses are hard to come by,” explained Hammond. “Many business owners will have to pass this cost on to the consumer if they can, otherwise, they will reduce staff hours, layoff employees or delay investments.”

CFIB submitted a report during the consultation process on minimum wage, which can be viewed here. 

For further information, contact Vaughn Hammond at 709-753-7745 or vaughn.hammond@cfib.ca.

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

Effect of Minimum Wage Increases on Employers

 
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.

 Effect of Minimum Wage Increases on Employees

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 employee and employer. The Employment Insurance contribution is determined by the appropriate rate in a given year (e.g. 1.63 per cent in 2017).