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.




Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Penticton Search and Rescue respond to six calls in less than a week

Two hikers rescued in early morning search near Greyback Lake latest in series of searches

In photos: Modified, yet traditional graduation gives Penticton graduates a sense of normalcy

Students around Penticton take part in pre-recorded graduation ceremonies

‘It’s about equality’ says Penticton man rallying for Black Lives Matter

“Canada is not exempt from racism and oppression,” said Geoff Stathers, standing with his #BLM sign

No active confirmed COVID-19 cases in Interior Health: BCCDC

Numbers from the BCCDC’s dashboard show 193 of the 195 COVID-19 cases in the region have recovered

COLUMN: Efforts preserve and promote local agriculture

Farming will remain an important element in the region

March dental conference key to many of B.C.’s COVID-19 cases

Early infections from China, Iran were quickly contained

Police seek help identifying person of interest in Salmon Arm arson investigation

A fire in a garage was extinguished but it is being treated as an arson.

Regional District of Kootenay Boundary rescinds all Grand Forks-area evacuation orders

Evacuation alerts for 1,136 Boundary properties remain in effect as officials monitor forecasts

MAP: Dr. Henry reveals which B.C. regions have seen most COVID-19 cases

B.C. health officials release a first look at how the novel coronavirus has reached all corners of the province

Filming to resume safely later in June: Okanagan Film Commission

Film commissioner Jon Summerland said they want to start filming again later in June

Kelowna RCMP investigate woman’s sudden death

Criminality is not suspected at this time, according to RCMP

Tla-o-qui-aht First Nation woman, 26, fatally shot by police in Edmundston, N.B.

Police were conducting a well-being check at the time of the incident

WATCH: Burned out car be gone thanks to Vernon dealership, ski resort

Bannister GM Vernon and SilverStar Mountain Resort team up in road cleanup

‘We either make a difference or we don’t’: Revelstoke teen leads protest in support of BLM

Revelstoke joined cities across the world protesting against racism and police brutality

Most Read