Wage increase double edged sword for business

A proposal to bolster the Yukon’s minimum wage rate by $1.05 an hour would be disastrous to business and workers, says the Whitehorse Chamber…

A proposal to bolster the Yukon’s minimum wage rate by $1.05 an hour would be disastrous to business and workers, says the Whitehorse Chamber of Commerce.

Under the Yukon employment standards board proposal, minimum-wage earners — from the retail and food-service industries, for example — would see an extra $80 on their biweekly paycheques.

“It is going to hurt the people who it’s meant to help,” said chamber president Rick Karp.

Increased operating costs will force business to hire fewer employees or cut worker hours, he said.

In November, the Yukon employment standards board proposed to raise the minimum hourly rate to $8.25 from $7.20.

The government is currently collecting public feedback on the proposal through its website.

The increase would make the Yukon competitive with the other two territories.

Nunavut’s minimum wage is $8.50 an hour, the highest in the country. The NWT’s is second highest, at $8.25.

Newfoundland and Labrador and New Brunswick sit at the low end of the scale, $6.50 an hour.

“I think it’s too much, too fast,” said Karp. “The Yukon and Whitehorse are not considered secluded anymore. It’s not like Yellowknife, where you need an ice bridge, or Nunavut, where you have to fly in to communities.

“If you went to a grocery store to buy something and it was $5 one day and $7.50 the next, you’d say, ‘Oh my God, what happened here?’” said Karp.

The board proposed the rasie because the territory’s minimum wage hasn’t been increased since 1998. Since then, the consumer price index — the inflation in the price of set amount of goods — has increased about 14 per cent, according to a government release.

The board also proposed annual wage hikes tied to the consumer price index, to account for ever-increasing costs of living.

“There would be absolutely no control in a business sense,” said Karp.

And there’s a ripple effect in a rise in the minimum wage, said Karp, who called it a “compression allocation.”

When the lowest wage is increased, all other employees’ wages must be adjusted to keep them a fixed percentage above the minimum, he said.

So the impact extends beyond minimum-wage earners, and it can be fiscally deadly for businesses that haven’t budgeted for increases in 2006, said Karp.

The chamber is suggesting the increase be phased in over two or three years so businesses have a chance to catch up.

Other provinces like Saskatchewan and Ontario are phasing in their rate increases, said Karp.

It’s “quite amazing” to see such a large increase on the books, said Carol Brown, manger of Employment Central, a government-sponsored job counseling shop.

A lower minimum wage could act as an employment deterrent for some because people can earn more by not working and receiving Employment Insurance or social assistance.

“We certainly see that happening,” said Brown.

Although very few minimum-wage jobs come through Brown’s office — employers usually raise their rates to attract the best workers, she said.

According to statistics from the Law Commission of Canada, 4.6 per cent of Canadians earn minimum wage.

And nearly half of all minimum wage earners are between the ages of 15 and 19. More than 75 per cent are full- or part-time students.

The government’s consultation process on the hike continues until January 20th.