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. About Us Canada’s Podcast is the number one podcast in Canada for entrepreneurs and business owners. Established in 2016, the podcast network has interviewed over 600 Canadian entrepreneurs from coast-to-coast. With hosts in each province, entrepreneurs have a local and national format to tell their stories, talk about their journey and provide inspiration for anyone starting their entrepreneurial journey and well- established founders. The commitment to a grass roots approach has built a loyal audience on all our social channels and YouTube – 500,000+ lifetime YouTube views, 200,000 + audio downloads, 35,000 + average monthly social impressions, 10,000 + engaged social followers and 35,000 newsletter subscribers. 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