Survey Shows Negative Impact of Min. Wage Hikes on Small Business

September 15, 2016

CANADA – To coincide with the recent 40 cent increase in the minimum wage by the BC government, the Canadian Federation of Independent Business (CFIB) released new survey results that clearly show the negative effects on small business growth and employment from hiking the floor on wages.

  • As a result of minimum wage increases in the past, one-third of BC business owners reported reduced profits (34 per cent), nearly one-fifth delayed expansion plans (19 per cent), and another one-third were forced to raise their prices (33 per cent).
  • Minimum wage hikes affected employment, with 16 per cent reducing the number of employees, 18 per cent cutting hours for staff, and 26 per cent reduced hiring of youth and/or inexperienced workers. The results are even more significant if only those employers with entry-level positions are included.
  • Seventy-nine per cent of BC business owners think the government should be required to conduct and publicly release the results of a thorough employment and economic impact analysis for proposed minimum wage increases.

“Many business owners, especially those in the service sector, operate in highly competitive markets and on razor-thin profit margins. Obviously, they will have to make lots of adjustments inside the business, including cutting jobs and hours, in order to accommodate such a large jump in payroll costs”, stated Richard Truscott, vice-president of BC and Alberta.

Recent CFIB analysis of Statistics Canada data shows approximately one-in-three business owners effectively earn $15 an hour or less, compared to one-in-five paid employees. The incomes of business owners in the hospitality and retail sectors were even more modest.

“The knee-jerk impulse to force employers to pay higher wages for entry-level jobs may make the politicians feel like they are doing something, but it may actually do more harm than good.,” added Truscott. “When you add that to a potential CPP payroll tax increase, it’s easy to see why many small businesses are seriously worried.”

CFIB recommends the provincial government help working Canadians move into better paying jobs through access to education, more effective training programs, and useful information about where higher paying jobs exist.

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