Province’s minimum wage hike draws concern

Throughout the Liberal leadership campaign, Christy Clark threatened to “unleash the power of Families First” on the B.C. economy. Nobody, besides Clark, really knew what that meant, but Wednesday afternoon we found out. Clark ran as a Liberal, and that is what she is proving to be.

Clark’s notion of “families first”, and presumably that of her newly minted cabinet is to create an economic environment in which some members of many families will not be able to get a job. The idea that increased structural unemployment for students, part-timers and new Canadians, particularly those with limited job and language skills, somehow puts “families first” is a stretch. As a result of Clark’s minimum wage increase, the first place many family members will go is the EI office.

Advocates for minimum wage laws, and particularly those who want an increased minimum wage, while well intentioned, ignore the negative consequences their actions have on entry-level and skills-challenged workers. Mandating a “minimum” wage level guarantees that some people will never get a job — because the minimum wage mandated removes, by law, the one bargaining chip the skills-challenged worker has to secure employment — price.

By removing an individual’s opportunity to compete for a job on the basis of price or wage, the government is in effect encouraging the business to discriminate against the low-skilled worker. There is no economic penalty to a business for this discrimination, thus rewarding the business to not hire the unskilled. In fact, the business would be breaking the law to hire the employee at the “market” price.

Clark’s “Families First” wage policy will raise the minimum wage nearly 28 per cent in about 13 months. Nobody in this economy has received a 28 per cent raise in one year. Clark boasts her new minimum wage will “put an additional $4,000 annually” in the pocket of the minimum wage worker. Assuming the worker is still employed, which is unlikely.

While $4,000 more sounds good to the progressive/left of the BC Liberals, it is a huge drag on business’s ability to operate profitably. A business with 25 employees at minimum wage today, will be faced with an additional labour cost of $100,000 in wages as of May 1, 2012. Include basic benefits, EI, CPP and other expenses, and the total increase will be closer to $120,000 annually for the business.

Adding a total of $120,000 of labour expense reduces our sample business’s profit to $105,000. The owner has a few choices to maintain profitability. They can raises prices they charge for goods and services, they can cut costs, or they can do a little of both. Or they can scale back operations and hope to get back to 10 per cent profit. The most likely response to Clark’s wage increase will be a reduction in the minimum wage labour force. Business will automate as much as possible to replace workers. Business will reduce hours for existing employees. Business will look to hire and retain only skilled and experienced workers who earn more than minimum wage. Business will relocate operations to Alberta or other “friendlier” places.

The unintended consequence of Clark’s keystone labour policy will ensure the unskilled, inexperienced and youth workers will be underemployed for the foreseeable future. Clark’s minimum wage policy rewards business to move as many operations as possible out of province. Clark’s minimum wage policy will encourage an “under the table” labour pool, whose members will have none of the protections or benefits afforded the legitimate employee. The unintended consequence of Clark’s “Family First” policy is structural underemployment and a slow down in economic activity.

One wonders if Clark believes she ought to be able to set the price of labour, what other prices does think she ought to set to put “Families First”? That sucking sound you hear is the air coming out of the balloon of B.C.’s fragile economic recovery, and the wind at the back of Clark’s rivals on the right.

Mark Walker is the publisher of the Penticton Western News.




Just Posted

New X-ray machine at the South Similkameen Health Centre will be up and running after Labour Day

Interior Health confirms the equipment was replaced because it was an old version

Local artists hold first annual Keremeos Art Walk

Painter Bonny Roberts hopes to make Keremeos’ first art walk an annual event

The Offspring and Sum41 ready to rock Penticton

The Offspring and Sum 41 will stop in Penticton to the South Okanagan Events Centre

Motorcyclist involved in Westside Road crash

Air ambulance assists while motorists face lengthy delays

VIDEO: Canadian zoos’ captive breeding programs help preserve endangered species

Programs considered last-ditch effort to prevent local extinctions of turtles, butterflies and more

Two hiking families team up to extinguish fire in B.C. backcountry

Children and their parents worked for three hours to ensure safety of the popular hiking region

Man launches petition to bring charter schools to B.C.

The move could see up to 20 charter schools come to the province

Okanagan’s alleged “Deadpool” robber revealed

RCMP catch up with suspect following gas station robbery earlier this month

RCMP searching for missing Kelowna hitchhiker

Cody Kolodychuk was last heard from on July 31 and was thought to be hitchhiking in the Vernon area

South Okanagan pays it forward to BC Wildfire Service firefighters

Community members thank Eagle Bluff firefighters through Tim Hortons donations

Vancouver man arrested after pregnant woman’s SUV stolen, then crashed

Police are recommending charges against a 22-year-old Vancouver man

Elections Canada to assess ‘partisan’ climate change rhetoric case by case

People’s Party of Canada Leader Maxime Bernier has said climate change is not an emergency nor caused by human

Unseasonable snow forces campers out of northeastern B.C. provincial park

Storm brought as much as 35 centimetres of snow to the Fort Nelson, Muncho Lake Park-Stone Mountain Park

Most Read