The Unintended Consequences Of A Mandated $20/Hour Living Wage: Cfib Report

In this video interview, Beatrix Abdul Azeez, Policy Analyst with the Canadian Federation of Independent Business, discusses a new report outlining the consequences of a government mandated $20 per hour living wage.

Beatrix Abdul Azeez

PRESS RELEASE
TORONTO, May 15, 2024 /CNW/ – Mandating a $20 per hour living wage in each province would cost the Canadian economy $44.9 billion in extra wages and put almost 600,000 small businesses at risk of becoming unprofitable, finds a new report by the Canadian Federation of Independent Business (CFIB).

The report, entitled “Affordability, minimum wages, and living wages: Striking a balance for small businesses,” analyzes the impact of a $20/hour living wage, a proposal under consideration by several organizations. The report finds that governments need a new approach to address affordability challenges as traditional minimum wage and living wage policies fall short in addressing the root causes of the rising cost of living while simultaneously increasing costs on small businesses.

 

“Minimum wage and living wage policies often miss the mark when it comes to truly supporting the most vulnerable workers. Governments are setting these wages with no anchor in economic reality, relying on subjective and unpredictable criteria,” said Beatrix Abdul Azeez, CFIB policy analyst. “Governments should shift away from relying on these blunt tools and instead adopt a new approach to ensure workers can cope with the rising cost of living, while also guaranteeing that small businesses aren’t unfairly burdened.”

The cost of adopting a $20/hour living wage in each Canadian province

Province

Cost (millions)

Small businesses at risk
of unprofitability

Newfoundland and Labrador

$943

10,653

Prince Edward Island

$332

3,100

Nova Scotia

$1,933

14,048

New Brunswick

$1,543

12,519

Québec

$10,255

141,927

Ontario

$16,741

200,387

Manitoba

$2,748

23,485

Saskatchewan

$1,823

18,432

Alberta

$4,309

73,181

British Columbia

$4,325

75,495

Canada

$44,900

572,499

The unintended consequences of minimum wage increases

Recent minimum wage hikes forced 60% of small businesses to raise wages for other workers and 59% of them to raise prices, contributing to current inflationary pressures. In addition, 31% of small businesses had to cut back on hiring young and unskilled workers, with 25% of them reducing overall employment. These findings underscore the need for a more nuanced approach to wage policies that consider the diverse impacts on both workers and businesses alike.

“Canada’s cost of living crisis requires a more effective framework: making sure rent, food, and gas prices are affordable and stable while extending support to workers and small businesses through tax reductions,” added Jairo Yunis, CFIB’s director for BC and western economic policy. “This would go a long way in addressing Canada’s affordability shock.”

CFIB recommends that governments:

Alleviate the impact of rising minimum wages on small businesses by reducing other taxes and payroll costs (such as small business tax rate, CPP, EI, health/education payroll taxes, etc.)
Establish a minimum wage setting process that is predictable, transparent, reflective of market conditions, and mindful of economic impacts.
Link minimum wage adjustments to private sector wage growth or a predetermined percentage of the median wage.
Address the root causes of the affordability crisis by enacting policies to increase the supply of housing, reduce energy taxes, and remove interprovincial and international trade barriers.
Provide targeted fiscal support for vulnerable workers through reduced personal income tax rates, increased basic personal amounts, and expanded tax credits.
Read the full report here.

About CFIB

The Canadian Federation of Independent Business (CFIB) is Canada’s largest association of small and medium-sized businesses with 97,000 members across every industry and region. CFIB is dedicated to increasing business owners’ chances of success by driving policy change at all levels of government, providing expert advice and tools, and negotiating exclusive savings.

Mario Toneguzzi

Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list. He was also named by RETHINK to its global list of Top Retail Experts 2024.

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