What Determines a Fair Wage?

The Voice of Business Advocates for a Slow and Measured Increase to Minimum Wage.

On November 17, 2017,  the Parksville & District Chamber of Commerce appeared before the Government of BC's Fair Wage Commission to present our postition on how BC should achieve their goal of implementing a minimum wage of $15/hr.

We recognize the difficulties that a sudden increase to minimum wages presents to business and wanted to ensure we voiced those concerns to government. We consulted with several of our members in the service sector prior to preparing the presentation. The postion we presented sought a gradual increase on a set formula that would allow businesses to prepare for those increases.

What determines a fair wage? It is often explained using the theory of supply and demand where in a market place with a shortage of workers employers must compete for the best workers for their business and in a market with a surplus of workers, employers can be selective about who they hire. In reality that is not so. Unfortunately, there are some who will try to help themselves at the expense of others. To protect peaceful productive citizens against those who resort to such actions, government intervention is necessary.
The institution of minimum wages provided a tool to protect the most vulnerable workers from exploitation. This was at a time where people had little to no recourse for unfair work practices and in fact many of the people who were looking to be protected were not even franchised when the early minimum wages were introduced to protect women and children.

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The fact that this reality is no longer present has led to a shift in the reason for legislated minimum wage rates. We now have a situation where proponents of significant increases to the minimum wage link increases in the minimum wage to reducing poverty and affordability while employer groups argue that attention needs to be paid to the very real impact increases to wage rates have on employers, middle-income workers earning more than the minimum but less than a higher paid skilled worker and those employees in sales whose wage is determined in part or whole through the receipt of a commission.

While the Chamber agrees that it is important to have a minimum wage to protect vulnerable and young workers it should be recognized that the minimum wage introduces a distortion into the wage market. In essence government sets a rate that forces employers to pay a minimum rate of pay irrespective of the type of work (with the exception of liquor servers) and with no relationship to the experience, training or skill level of the worker.

 

The other aspect of the distortive impact of minimum wages is that they fall primarily on small business. the minimum wage is paid for positions that have little to no training and are primarily paid by employers who do not have the ability to pay higher wage rates. These small businesses are also heavily focused on the service sector where 91% of minimum wage earners are employed.


In addition, significant changes to the minimum wage have an unfair consequence to those low middle-income workers earning just above the minimum wage who may not see an increase in their pay when the minimum goes up. In fact it is likely that these workers will lose some or all of their employment if employers adjust their labour model to compensate for minimum wage increases.

B.C. continues to have a low rate of individuals earning the minimum wage. In B.C. 5.9% of the paid workforce earn the minimum wage, significantly below the national average of 7.2% More importantly than the number of workers who earn the minimum wage it is important to look at the situation of those workers who earn the minimum wage. Of the people who earned the minimum wage in 2014 we see that:
• Part time workers 57%
• Defined as head of the family 7%
• Youth living at home: 52% (of these workers 47% were attending school)

For those workers who are heads of household or those whose primary income is at the minimum wage the chamber recognizes that in B.C. this will lead to concerns about poverty and a challenge to access basic food and shelter. This places significant burden on individuals, families, communities and government services.

A significant portion of the labour force In Parksville is engaged in the service sector, enhancing our tourism economy by providing visitors with an excellent experience. Very few employers pay the minimum wage. Our last survey indicated the average entry level employee was earning over $13.00/hour

I don’t envy your position as you listen and attempt to find a balance to satisfy the desire to get to $15/hour without feeling the impacts of the potential consequences.

While the Chamber does not support a rapid increase to $15/hour; we believe that employers will find ways to adjust to a timely process by
• Absorbing - which will impact their ability to grow and hire for that growth
• Passing on the cost to the consumer- raising the price of goods which will have a negative impact on the minimum wage earner as they are also consumers
• Restructuring labour costs through increased productivity (hiring for skill rather than training to skill) or limiting labour force growth or both.

We want to be clear, small businesses cannot accommodate another large, unplanned increase to the minimum wage. The introduction of a link to CPI for increases going forward provides a level of predictability to businesses that allows them to plan and ensures that they will face no large increases in their labour costs.

We have seen the introduction of increases to the minimum wage to address political pressure. While we accept that the lack of any increase for the 2000’s created significant pressure on the minimum wage level that led to a significant increase. While the increase in 2011 was justified the 30% increase caused significant concern to business who absorbed a huge increase to their labour costs at a time when the economy was still recovering from the recession.

This was particularly concerning as the 30% increase was for no other reason than it moved B.C. up the ranking compared to other provinces. This is leading to an increased concern that provinces will continue to face pressures based on the relative position of other province, a case of ‘keeping up with the Jones’s.’ This raises the very real prospect of a less business friendly provinces significantly increasing their minimum wage thereby placing pressure on B.C. to follow suit.

To address these issues the Chamber is pleased to see the provincial government take a leadership role through the establishment of the Fair Wage Commission and moving the discussion into a more fact based public dialogue. An ongoing concern for business is the fact that increases in the minimum wage are not tied to any measurable outcomes. Business are being asked to carry ever higher minimum wage levels with no understanding as to whether the increase will lead to any improvement in social outcomes.

There is a significant lack of understanding and information in the public domain regarding the purpose and economic impact of minimum wage legislation. To address this government should commit to providing regular and accurate information through a ‘Minimum Wage Fact Sheet’. This should provide the public with a clear picture of who earns the minimum wage and allows the public to track the breakdown of minimum wage earners over time.

Further to this, the provincial government should work with their provincial counterparts to institute a mechanism where there is consultation on any proposed changes to individual provinces minimum wage levels. While it is unrealistic to expect that there will be formal coordination, or harmonization, of minimum wage levels it should be recognized that decisions on minimum wage levels have inflationary pressures on other provinces wage levels. Even if this process is unsuccessful in mitigating an individual provinces decision to significantly increase their minimum wage it may allow for an agreement between other provinces that they will not be pressured into matching with significant increases of their own.

The Chamber asks that increases be phased over a multi year period and that increases be limited to double the growth in CPI until the $15/hour target is reached and that further increases be held to the CPI. During periods of recession (i.e., when CPI and/or economic growth are negative) the minimum wage remains frozen, not just until economic growth resumes but until the inflation index has caught up (or returned) to its pre-recession point.

The Chamber has always held the viewpoint that business has an important community role to play. In Parksville we have generous community minded businesses who provide employment, contribute to the social welfare of the community through inclusive hiring practices and support community events and initiatives through donations of time and money.

We are optimistic that they will work with government through a smooth transition to a significant increase to the minimum wage.

We are asking on behalf of our 450 members and the community as a whole that the implementation of the increase be paced and predictable.


Presented by:

The Parksville & District Chamber of Commerce
Kim Burden, Executive Director
250 248 3613

 

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