Tuesday, November 13, 2007

Minimum wage hike

(crossposted to CanadaEast)

I wanted to take a moment to applaud the announcement today that the minimum wage will go up another 50¢ to $7.75. This is a significant move and it is the third hike since the Liberals took office. The minimum wage has increased $1.05 since the 2006 election.

This is a fairly substantial demand to make on small business owners. In fact, $1.05 in extra wages costs a small business owner with 5 FTEs $11,000 per year. Certainly not chump change. However, an increase in the minimum wage inevitably drives up other wages via a domino effect. That is good for all New Brunswickers and for New Brunswick, given the aim to retain and return people to our work force.

I remember in 2002 Paul Duffie was running for leader of the Liberals, and proposed the minimum wage be raised to $8 by the end of 2007. There were cries from within the party that this would destroy small businesses, a concern which was echoed by the media and the business sector itself. Regardless, it seems that this lofty goal is about to be met, and that is a great thing for our province. As of June 2006, New Brunswick had the lowest minimum wage in Canada. A year and a half later we've moved from 13th to 10th and are on the cusp of surpassing the 6 provinces that have minimum wages at $7.95 or $8.00.

I hope the government continues to move forward with this aggressive trend and pushes the minimum wage past $8 in the not too distant future.

Finally, on an unrelated matter, when I logged in to post this, I discovered that this will be my 300th post. A bit of a milestone and a good reason for me to thank all of you for reading and commenting and making this such a fun and rewarding exercise.

23 comments:

Anonymous said...

Extra Extra Shawn Graham puts it to Small Buisness again!!! three times in one year what are these guys thinking how much pressure is to much pressure Oh... I know when it all goes to hell then he can blame the PCs, god help us....

Eugene said...

All anyone has to do to be convinced the minimum wage should be higher is simply do the math.

$7.75*40*52=$16,120.

Now start deducting your own expenses and see how long it lasts.

And frankly, I couldn't give a rat's ass about any small business that pays their employees such a pittance. If you can't survive paying your employees a livable wage, you don't deserve to be in business.

NB taxpayer said...

It would seem as though they are tryingto phase in these minimum wage increases. There is no question that the increases will add a bit of incentive for work, although if they are going to subsidize wages they should have cut taxes on small business by a hefty amount so as to soften the blow of these planned minimum wage hikes.

Plus, it would hurt to increase the take home pay of NBers by cutting persinal taxes and incresing the exeption for lower incomes.

As it stands now, this looks like money being shifted from the taxes on business to wages and then recouped again through increased persinal taxes. A vicious cycle indeed where not only business loses, but so do taxpayers.

nbpolitico said...

Eugene - I can't agree more. The minimum wage increase (and hopefully more to follow) are much needed.

NBT - I am not sure if I follow your logic in that one. There is no wage subsidy involved here. I could see the argument of a double dinging (businesses have to pay more taxes and higher wages) or of the wage increase meaning nothing because it is offset by higher income taxes but I don't see any cyclical movement of cash here.

If there had been a corresponding cut in business taxes then yes there would be a cycle -> business get money back that they have to pay in high wagers to employees who see their gains offset by higher personal income taxes which pays for the provinical cut to corporate tax, repeat. However, that isn't what has happened.

Anonymous said...

It would be interesting to try and find out how much conditions have really changed for your average minimum wage worker. Do you think their financial position is stronger or weaker than when they made $5.50?

In my view, continued grocery and gasoline hikes have far outstripped the true rate at which minimum wage could be considered adequate (or honest).

The downside of inflation is also important to consider. By inflating the money, you've essentially robbed those individuals who earned and saved their money cautiously in the past. Their life savings are now worth less and less, while the working man waits longer and longer for these cost of living increases.

Nevertheless, the insane demands of fiat currency and debt servitude require that the money supply be augmented through market manipulation by our representatives.

At the same time, companies are not asked to justify mounting corporate profits, CEO bonuses and to explain their increasingly harmful / greedy strategies in what is laughingly put forward as the "free market".

In the long run, this myth cannot be maintained except through constant deception and manipulation of the market by corrupt politicians and self-serving businessmen.

RS said...

NB Politico,

I am disappointed that nobody has posted the obvious, Premier Graham is raising taxes, again. First, you must understand minimum wage is not really what companies pay their minimum wage employees, nor is it what employees take home in their paychecks. IT is a number that is somewhat related to both, however. Here is the math, using some examples above, based on your example of a small business with 5 employees at minimum wage.

$1.05 per hour increase is $11,655 per year ($1.05 x 40 hours per week x 50 weeks per year x 111%). The 111% accounts for vacation pay (two weeks), CPP taxes and EI taxes (employer portion only).

The comment from one poster, “And frankly, I couldn't give a rat's ass about any small business that pays their employees such a pittance. If you can't survive paying your employees a livable wage, you don't deserve to be in business.” Nice comment from someone obviously not working in a marginal industry. This however is not about your rat’s ass and is not even about the companies, it is about employees. You may not care if companies stay in business or close, but their employees do. Based on your logic, every company should pay all it’s employees $30,000 or $40,000 per year (or $100,000?). That would be a great boon to those that kept their jobs, but kinda tough on those unemployed. I have no problem with a higher minimum wage. Maybe $10 per hour is the right number, who knows? But this move is about government revenue, not poor people.

For example, at $7.75 per hour at 40 hours per week, the employer pays $8.14 per hour (this does not include vacation pay costs, sick days (if offered), health plan (if offered), it is just the employee). The employee then pays CPP and EI taxes and income taxes (both federal and provincial).

So the extra $1.05 per hour translates into more money for the feds (CPP, EI, Income Tax) and more money for the province (Income Tax).

If our Premier (and Prime Minister) really wanted to help out the bottom end of the pay scale they would do this:

Eliminate income tax on all incomes under $20,000
Eliminate CPP and EI taxes on Employees and Employers on all incomes under $20,000
Raise the minimum wage to $8.50 per hour.

Premier Graham, it is really easy to spend someone else’s money (in this case small businesses). You should come to the table with some of our money and give it back. I may not get any, but the poor would get a great deal. But as I say, this is about Liberal tax increases, not helping the poor.

RS

Eugene said...

Based on your logic, every company should pay all it’s employees $30,000 or $40,000 per year (or $100,000?)

Hmmm, with leaps of reasoning like that I suppose you'll have me suggesting employers should pay all employees rent or mortgages as well.

The funny thing about all of this outrage from those complaining it will hurt small business, is that they would be hard pressed to find a small business that actually has any minimum wage employees. They are all in the service industry, generally working for multinationals like McDonald's or Tim Horton's. Are they going to be shutting down if they have to pay an extra $1.00 in New Brunswick?
I don't think so.

Rob said...

Our changing employment environment will quickly make minimum wage redundant. When NB was an employer's market, we needed some mechanism to make sure that people weren't getting hosed. Jobs were so scarce that people would work for peanuts, and government had to step in to make sure they got cashews. Job supply was way down, demand was way up, so the price of labour was dirt cheap.

Today, unemployment as a societal problem is disappearing. Alberta, BC, and Saskatchewan already have full employment, and minimum wage is indeed redundant. Tim Horton's in Medicine Hat pays 9.00 an hour, with 3 weeks vacation and scholarship opportunities.

People will invariably say: "Rob, Alberta is different, this in NB, and we need this legislation". The thing is, unemployment is falling in NB. Labour demand is falling. You can't find a guy to lift boxes at a warehouse for $12/hour. Eventually, as the labour market continues to squeeze, places like McDonalds and Timmy's will start paying 8/hour, 8.25/hour, and so on.

This is a shortsighted, headline grabbing move. It will do little to help those on the margins long-term.

NB taxpayer said...

Hey NBpolitico, I think it's time you or spinks rolled out another NDP post. Maybe one that involves the Green party again?? lol

Anonymous said...

Dumb liberals bragging about upping minimum wage to 1970 wage level.
NBer's haven't seen such amateurism since hillbilly mckenna.

RS said...

Eugene,

By stating things like 'livable wage' you actually are suggesting employers should pay (through wages) employee's rent.

You are connecting cost of living to pay rates. Rent must be included in this equation, as would food, clothing and health needs. And for a family of four in Fredericton, I would hazard a guess $9 or $10 per hour will not cover it.

If these expenses are not included in 'livable wage' what does this term mean?

RS

Eugene said...

For me it means a wage level above the poverty line:

Single Employable 16,167
Person with a Disability 16,167
Single Parent, One Child 20,209
Couple, Two Children 30,424

Figures from Canadian Council on Social Development
The recent increase still doesn't meet the level for an individual and is not even close for a single parent.

Obviously my rent comment was outrageous because everyone understands that a wage is used to pay for the necessities. It was along the same lines as making comments that people who agree with raising the minimum wage must also want everyone to be paid $40,000 a year. What can't be argued is that even at the increased level, the minimum wage does not allow for individuals stuck in a position that pays such amounts to purchase life's basic necessities. I don't understand why such a basic concept has to devolve into an discussion about government tax revenue.

mikel said...

The rent comment is not outragious at all, in fact seems a blatant point of fact that misses reality and here it is:

Companies already DO 'pay your rent'. They also pay,well, EVERYTHING. Read some history, in the civil war most of the workers in the northern US fought for one reason, they were against slavery. What you never hear is that they considered ALL work for others to be 'wage slavery'.

Well, we have a system of wage slavery, you can't do anything about that, but you CAN 'update' what the slaves earn. Over 70% of minimum wage earners are between 15-24, so clearly this is an age issue. Combine that with NB having among the highest tuition rates and is it beginning to dawn on people why the province has such problem with educational issues like illiteracy?

So minimum wage isn't just connected with one issue. At that wage issue its far worse than what the above poster claims that 'we're suggesting companies pay their rent', in fact with minimum wage so low, then like the welfare system you are essentially SUBSIDIZING landlords. I think everybody can admit that the best situation for everybody is home ownership, but for some reason this is considered to be a plum only available if a person matches a certain degree of success.

This, of course, is what the 'livable wage' campaigns are all about, and why they also talk about RIGHTS as well. This, you have to remember, is a province where the poorest people don't even have basic human rights, and anybody who lives in an apartment can tell you that there is almost zero control of things like how much rent is paid.

But for minimum wage its a no brainer, the self sufficiency task force said $10. And as mentioned above, it is service level jobs that this affects most, and IF McDonalds closes, it won't be because of this. In fact, I seem to recall that its McDonalds policy to NEVER close a store because it looks so bad on the chain. Not only is this move 'right', its also necessary and doesn't even begin to touch the issues its meant to deal with-namely the working poor.

RS said...

Eugene,

The reason it turns into a discussion about tax revenue, is because the increase also raises taxes, both income and payroll.

I agree with you we should increase minimum wage, but there is more than one way to skin a cat as they say (no offense to the cat lovers).

We could increase minimum wage by increasing the absolute dollar amount (the rate), increase the personal deduction level for income tax (the part of your income you pay no tax on) or reduce payroll taxes (EI and CPP taxes).

I believe we should do all three.

I do not think we should disregard or be disrespectful to the businesses in our community that provide jobs. If minimum wage is set too high, some of them will close.

RS

mikel said...

Businesses in NB have already been given quite a break on that. There are also ways to help out any business that has trouble when labour costs get too high, however, a low minimum wage is pretty much the same as a subsidy, you can give Atlantic Yarn a pile of cash and let them pay their workers a liveable wage, or you can have a low minimum wage.

You can also change around deductions or the way capital investments are written off (currently being negotiated in the forestry sector).

But the long and short of it is that New Brunswick has the largest distinction between rich and poor, and thats for a reason. McDonalds aren't going to close, and if they do, then another will open up. I remember when the McDonalds on prospect had the highest profit margin in Canada, whoever owns that franchise is a millionaire and can certainly afford to pay their workers a few dollars more (they were also beneficiaries of the liberals lowering the tax on capital gains-which put more money in their pocket than this would).

Besides, there have been numerous studies showing that raising wage levels actually has a positive influence on the bottom line. Workers stay at jobs longer, which lowers training costs, they are happier, which means a lot in the service industry, and have fewer days absent. This is a case where employers simply don't know what is best for themselves, however, the reasons for doing it are to benefit the workers who need it far more than the owners.

The bad side of that is in a small economy like NB there is a fairly limited business caste, so for example Charles did an interview with a poverty activist who said they didn't push this legislation because they knew from firsthand experience that business owners would simply cut their staff to cover the costs. No matter how much money some people have its never enough. So there should also be an effort to make sure safety laws and labour laws are paid attention to to make sure the whip just doesn't get cracked harder (and face it, Canada doesn't exactly the lead the pack on this)

Anonymous said...

Why is it at Tim Hortons in Calgary my coffee costs the same as the coffee in Moncton? The property costs for that establishment in Calgary is 3,4, or 5 times what it is in Moncton. The person serving me the coffee in Moncton makes a third of what the same person in Calgary earns.

Obviously, if the Tim's in Calgary is still making money why can't the owner of the Moncton store pay the same and bring in a profit?
The same goes for McDonald's, Wendy's and all those other service companies that charge the same for their services, regardless of where they are located.

Perhaps I am missing something. Can someone enlighten me?

Monctonite.

Anonymous said...

Why is Joe Day in the Senate ?"

"Beats me, I checked on Bourque, he's got a link to all Senators, and this guy was appointed by Chretien back in 2001."

"So he's been in the Senate for 6 years and nobody's ever heard of him ?"

"That's nutin, he's due to retire in 2020."

"In 2020 ? Holy shit, what's his claim to fame to be in the Senate for 2 decades ?"

"Near as I can figure he ran and lost in a bunch of elections back in the '70s & '80's."

"Nice."

"That and now he's on just about every parliamentary junket committee known to man."

"Junket committee ?"

"Yeah, the Canada-China Legislative Association, the Canada-Europe Parliamentary Association, the Canada-France Inter-Parliamentary Association, the Canada-Japan Inter-Parliamentary Group, the Canada-UK Inter-Parliamentary Association, the Canada-United States Inter-Parliamentary Group, the Canadian NATO Parliamentary Association, the Commonwealth Parliamentary Association, the Inter-Parliamentary Union, the Assemblée parlementaire de la francophonie, the Canada-Germany Friendship Group , the Canada-Israel Friendship Group, the Canada-Italy Friendship Group, and my personal favourite, the Canada-Mongolia Friendship Group."

"Mongolia ?"

"Yup."

"Join the Senate, see the world, cripes, I can't see this guy voting for an elected Senate. Or its abolition, for that matter."

"Hey, for all we know Junket Joe's the hardest working fella in the Senate."

"Who knew ?"

"Well, that's kind of my point. Who knew."

"Where's he from ?"

"New Brunswick."

"New Brunswick ?"

-Bourque

Anonymous said...

You've fallen for all of that lefty, organized labour crap. Increasing the minimum wage does nothing to help those in poverty because about half living in poverty don't work, about a third are seniors. Raising the minimum wage just makes the politicians feel good. You should read the 2006 report on minimum wage for the feds where it concluded minimum wage is an “exceedingly blunt instrument for dealing with poverty, and may actually have a perverse effect, exacerbating poverty.

Increasing the minimum wage 3 times in 18 months is just crazy. They would never think about doing that for their own employees. This wage increase was all politics no policy.

Small businesses in the province is suffering particularly those that have a lot of young or part time workers that make minimum wage such as retail and foodserive. People are rushing across the border to the US and tourist aren't coming up. On the other side of the equation, government has been sticking it to these sectors by increasing small business taxes and income taxes and reducing the cut and # of vlt machines for licensees. On top of this don't forget the enery rates.

Small business is the backbone of the economy and the Graham government seems to be doing everything it can to make them fail. Take off the rose coloured glasses and put yourself in the real world.

Anonymous said...

They are all in the service industry, generally working for multinationals like McDonald's or Tim Horton's. Are they going to be shutting down if they have to pay an extra $1.00 in New Brunswick?

How naive you are... The owners of these local stores are NOT a big multinational company but local business people that live in and support their local communities. So when you hit them with a wage increase a few things happen. #1 they look at ways to save labour costs by reducing hours of operation or hours for staff or invest in something that takes away labour. So all that has happened is the kid that is saving for college, or the housewife that is looking for a little extra cash loses their job.
#2 The operators invests less in the business or community. How many of these people support everything from their local schools to hospitals to sports teams.
Get of your high horse. People earning clsoe to minimum wage in these businesses are generally unskilled and are picking up extra cash for studies or to supplement family in come. If you looked at it statistically, I think you would be hard presses to find families that are supported by minimum wage earners.

Anonymous said...

Joe Day is in the senate because of Georgie Day,and a slurpie tongue

Anonymous said...

People should look a little closer to the truth when it comes to "local Business" in large cities have you ever wondered why there are a large number of Imigrants working there, these poor folks dont know the truth but the fact is the Business get help from the Feds to pay all most half of there pay check so we should take those type of resturant stores out of the conversation. As for the rest, its good news for the employee and bad news for Business and fantastic news for shawn graham he gets to tax the death out New Brunswickers. Tax and spend folks, Tax and Spend.

Anonymous said...

I think that we need to look at how the economy of Australia works. Most of the people have no clue what the minimun wage if because businesses would be too ashamed to pay someone a wage that keeps them in poverty, kind of like our beloved call centers that McKenna invested in. Problem is that corporations have no problem paying low wages because they have no face in the community, kind of like Irving. They could pay better but don't becuse they don't have to face the poor guy who makes that wage. The guys making that wage either are at a bad piont in life, have little education or skills and therfor are punished with minimum wage. It is a reality that shouldn't exsist but does especially in this Province. No Politician will call out Corporations to pay better because that will lessen their chances to work in a cushy private sector job if politics doesn't pan out.

Anonymous said...

I agree,
Look at McKenna he gave 11 million for UPS to set up a call center that pays low wages, then he leaves politics and is on their corporate board, and now UPS is giving money to the Liberal party of Canada and the Liberal Leader coffers. It is a viciuos cycle that has to end, especially when Politicians use public funds to enhance their employability after politics.