Fresh debate precedes June 1 minimum wage hike
Increase to $12.65 an hour kicks in on Friday, en route to $15.20 by 2021
Vancouver-based coffee chain JJ Bean is ahead of the curve on raising B.C.’s minimum wage. It bumped the company’s starting rate to $14 an hour in January, and hasn’t felt any negative effects, according to CEO John Neate.
“I think we did the right thing,” said Neate, five months and four days ahead of B.C.’s first legal step in increasing in minimum wage, a $1.30 raise to $12.65 an hour, on the way to $15.20 by 2021.
As the June 1 date nears, there is new debate over whether the increase is too fast, will come with unintended consequences and whether there are better ways to end poverty.
The Vancouver-headquartered Fraser Institute released a report Monday that argues governmentfunded income subsidies would be a better way to increase the incomes of low-wage workers without unintended consequences.
Neate, however, sees the need for higher wages because “It’s so hard for staff just to live in Vancouver now.
“I hear stories every day: People can’t find places to live, being kicked out of their places because they’re being torn down,” Neate said.
“I don’t begrudge (them the raise) at all.”
Neate said a bigger issue for his business will be the provincial payroll tax intended to replace healthcare premiums.
Raising the minimum wage to $15 an hour was a key plank in the NDP’s election campaign to make B.C. more affordable. The raise isn’t happening as quickly as hoped for the B.C. Federation of Labour.
But the president, Irene Lanzinger, said the organization will celebrate Friday’s raise.
“It will be a significant increase for some workers, those on minimum wage,” Lanzinger said.
The total increase — 34 per cent over four years — will likely come with unintended consequences as employers adjust by hiring fewer workers or cutting hours, said Fraser Institute economist Charles Lammam.
Lammam said his think-tank’s study found that 84 per cent of B.C.’s minimum-wage employees don’t live in low-income households, according to figures from Statistics Canada.
They tend to be younger, less-educated and less-skilled employees starting out in the workforce who still live at home and stand to be hurt by employers cutting hours or paring hiring.
Companies that can will speed up the rate at which they adopt labour-saving automation, such as using self-serve kiosks at fastfood restaurants.
And the institute’s research cited studies that correlated increased minimum wages with lower youth employment rates.
“If we want to have a genuine conversation about helping the working poor, let’s talk about policies that can be effective,” Lammam said.
“It turns out the minimum wage (is not).”
Lammam argues that expanding work-based subsidies, such as the federal income tax’s workers’ benefit, which targets low-income households, can encourage people to work since the benefit is tied to having some level of job income.
Lanzinger, however, argued that the Fraser Institute focus on people making the minimum-wage rate is too narrow, since it ignores workers who earn not much over the minimum, but still below the poverty level, and aren’t much better off.
In its own research, the labour federation found that almost a quarter of B.C. workers earned less than $15 an hour, and “those are not all kids living in their parents’ basements,” Lanzinger said.
She added that people zeroed in on $15 an hour because it gets people just above the poverty line as defined by Statistics Canada.
“Everybody who works deserves a decent wage,” Lanzinger said, “and there really is no excuse for paying anyone poverty wages in British Columbia.”
While Ontario made a steeper first jump, to $14 an hour from $11.60 in January, economist Iglika Ivanova argued it is too soon to judge whether it is causing any harm, such as reduced hiring or cutting hours.
However, Ivanova, with the left-leaning think-tank Canadian Centre for Policy Alternatives, said food bank use in Toronto declined over the first three months of this year.
In a Toronto Star report, one of the food banks credited the decline to several policy changes including easing of welfare rules, indexing the Canada child benefit and the higher minimum wage.
Ivanova said minimum-wage jobs tend to be concentrated in sectors such as janitorial services and food services.
In food services in particular, Ivanova argued that raising prices a bit to pay higher wages is a better trade-off than increasing other public transfers.
And trying to use lower minimum wages to fend off automation isn’t a good argument, according to Ivanova, since “you’ll see when the price of automation (decreases), everyone adopts it” anyway.