The day after $15
Would a $15 minimum lead to a jobless wasteland — or a land of milk and honey?
In principle, Hervé Mallet supports the idea of a $15 minimum wage. “My employees deserve to have $15, they probably deserve to have $20,” said the Bathurst, N.B.-based owner of a St-Hubert Express chicken franchise. “But can I raise my prices by 40 per cent? No friggin’ way.”
Mallet has about 40 staff, 75 per cent of whom make minimum wage. If he was suddenly mandated to give them all a 40 per cent raise, Mallet said it’s equivalent to $90,000 in additional costs per year — a sum that would plunge him into the red for virtually every month of the year.
Financially, it’s “suicide,” he said.
Seattle did it. New York is thinking about it. Alberta is doing it. And now, with a federal election in full swing, the push is on for all Canada to adopt the new brass ring of the labour movement: a universal $15 minimum wage.
To unions and labour activists, it will vanquish poverty, spur local economies and is “only fair.” But to a worried cadre of business owners and economists, it is a looming nightmare. On the Day After $15, they say, Canada will be wracked by inflation, wayward youths, unemployment, bland hamburgers and robots taking our jobs.
“You would be paying 47 per cent more for everything I sold you,” said Tom Morris, owner of the Kindersley Inn, a hotel and restaurant in the 5,000-person town of Kindersley, Sask.
Roughly 30 per cent of his hotel staff make the Saskatchewan minimum wage of $10.20, and 80 per cent of his workers make less than $15 an hour.
He won’t suddenly be selling more hotel rooms. He won’t be slashing maintenance or staffing levels. And, after going to the trouble of opening a hotel, Morris said he has no intention of taking a permanent hit to his profits.
“I’d pass it on to the consumer, and if the consumer didn’t like it, I’d shut my doors, carry on and do something else,” he said.
The small businesses were responding to “what if ” questions from the National Post, and to be fair, no major party is proposing a Canada-wide rise to the minimum wage.
The NDP is touting a “national minimum wage” of $15, but it would only apply to federally regulated industries such as banks, airlines and uranium mines — few of which are paying their workers in the $10-$15 range.
Nevertheless, the idea is to lead the way toward similar wage hikes at the provincial level. “We think it’s important to send a signal,” NDP leader Thomas Mulcair said last September, when the policy was first proposed.
If Canada woke up tomorrow to a labour market in which nobody was allowed to make less than $15/hour, the first consequence, say critics, would be a lot of angry cooks and store managers.
A franchise owner in Atlantic Canada contacted by the National Post said he already has senior staff making close to $15 an hour. Under any across-the-board salary raise, those managers would suddenly be making the same as their underlings.
“You take away any opportunity to reward staff for good work. Everyone gets paid the same,” he said. That, or there’s a “domino effect” of wage increases.
From 2005 to 2014, Newfoundland saw a dramatic rise in the province’s minimum wage from $6.25 per hour to $10.25.
Brenda O’Reilly owns O’Reilly’s Iris h Pub and Yellowbelly Brewery — both located in St. John’s — and despite Newfoundland’s economy swelling with oil wealth before the recent commodity crash, she said the period was the “most challenging time I’ve ever managed.”
Labour is 40 per cent of her expenditures — her largest single cost. If the minimum shot up still further to $15, along with the accompanying EI, CPP and workers’ compensation charges, she’d be forced to undergo a dramatic triage of layoffs and cost-cutting, she said.
“You might roll back hours; you might close two days a week; instead of opening for breakfast you just open for lunch and dinner,” she said. “It would be devastating.”
Other restaurants suppose they’d start skimping on quality. That is, if they couldn’t convince consumers to get used to $20 hamburgers.
“The impact on the consumer is poor service, less made from scratch and more processed foods … we can’t afford to do it the right way,” said a B.C. restaurateur. In a province where recent polls showed 68 per cent in favour of a $15/hour wage hike, he spoke on condition of anonymity for fear of driving away customers.
There are wide geographic consequences to a nationwide $15 wage. In low-earning Atlantic Canada, the wage rise would represent a seismic shift to local labour markets, but in parts of the country a $15 minimum wage wouldn’t do much of anything at all.
In Alberta, the introduction of a $15 minimum — which will kick in by 2018 — was relatively uncontroversial for the precise reason that years of oil boom and labour shortages had hiked wages already. According to the most recent statistics, the average 15 to 24-year-old Albertan already earns $17.54 an hour. In New Brunswick, by contrast, the figure is $12.56.
In the United States this month, the Pew Research Centre has been circulating a data table hinting that a “one size fits all” minimum wage may not work for the United States, given the wide regional differences in cost of living. The food, rent and haircuts that US$15 would buy in New York, for instance, could be had for as little as US$10.43 in rural Alabama.
And then there are the robots.
Just last week, during a phone update with investors, Wendy’s Co. chief financial officer Todd Penegor said the fast-food giant was going to use technology to offset “future wage inflation.”
Self-order kiosks in the front, and automated hamburger flippers in the back.
In high-wage Europe, McDonald’s has already slimmed payrolls by installing more than 7,000 touchscreen kiosks in its restaurants.
Economists have never been fond of the minimum wage either.
In the 1990s, the administration of U.S. president Bill Clinton was mulling a “modest” rise to the federal minimum wage. In response, a committee of U.S. Senate Republicans cited more than 50 years of economic studies and drafted an apocalyptic report declaring that the minimum wage “hurts the poor,” “hurts blacks,” drives teenagers to crime and was, apparently, a tool of apartheid repression.
“The minimum wage helped South African whites at the expense of blacks,” it read.
These days, critics aren’t quite so dramatic.
The rhetoric was cooled down significantly by a landmark 1994 study that gauged the effects on fast-food restaurants after New Jersey hiked its minimum wage from US$4.25 to US$5.05. The US$4.25 wage remained in place across the border in Pennsylvania. Despite the raise, New Jersey’s fast-food employment rose.
And Seattle, which began phasing in a $15/hour minimum wage in April, has avoided any apparent signs of economic ruin. Ivar’s Seafood Restaurants, for one, raised their menu prices by 21 per cent, told customers they didn’t need to tip, and saw revenue soar under the new system.
But what spooks Canadian critics is the sheer magnitude of a $15 increase — and the fact that it would hit plenty of regions with less money to spare than Seattle.
Lately, Canadian defenders of a $15 wage have been leaning on a report from the Canadian Centre for Policy Alternatives. Published earlier this month by UBC economist David Green, the report has no new research, but draws on existing studies to predict that a $15 hike wouldn’t result in the “massive job losses” portended by other economists.
But Green acknowledges that even in high-wage B.C., a $15 hike to the minimum wage would need to be accompanied by programs to cope with new ranks of unemployed.
Of those currently making between $10 and $15 an hour, he wrote, roughly 7.6 per cent would lose their jobs — and that’s in the unlikely scenario that all other economic factors remain constant.
Applying that number solely to the one million Canadians earning minimum wage, that’s 76,000 jobs lost.
Yellowbelly Brewery’s O’Reilly is not an anti-minimum wage radical.
She supports the concept and even supports regular annual increases to the rate, as long as they “can be managed and planned for.”
An overnight hike of $4.75 to the minimum wage could potentially be managed with creativity and sacrifice, but “I don’t think I’d have the energy for it, to be honest,” she said.
You might close two days a week. It would be devastating One restaurant hiked prices and dropped tips. Revenue soared