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BC’s Minimum Wage Increase Will Lead to Labour Cuts, Higher Prices, Small Businesses Warn

BC’s Minimum Wage Increase Will Lead to Labour Cuts, Higher Prices, Small Businesses Warn

VANCOUVER—As labour groups praise the B.C. government for pushing the minimum wage up from $15.20 to $15.65 an hour, small businesses say the move will lead to unintended consequences, including cuts to their workforce and further price jumps for consumers amid rising inflation.

“It’s been very difficult especially in an environment where the margins are slim to begin with,” Matti Rikkinen, owner of Robba Da Matti restaurants in Vancouver, said in a phone interview.

“And then the province has created additional burdens upon us without any consultation, without any regard for the struggles that we’ve been going through these last two years.”

Fiona Famulak, president and CEO of the BC Chamber of Commerce, warns that B.C.’s small- and medium-size businesses will bear the brunt of the wage increase the most.

While the chamber “strongly supports” fair wages, Famulak said it’s also concerned about the timing of the announcement.

“At a time when businesses are reeling from rising costs resulting from the pandemic, supply chain issues, B.C.’s paid sick leave program, and historic gas prices, we strongly believe that any minimum wage increase must be considered against all the costs, levies, and taxes that have already been imposed on businesses by government,” she said in an email.

On March 14, Labour Minister Harry Bains announced that B.C.’s hourly wage will rise by 45 cents starting June 1, making it the highest minimum wage among Canadian provinces.

Bains said it’s the first time B.C. has tied the wage increase to the provincial average annual inflation rate, reported at 2.8 percent last year—compared to the 2021 national rate of 3.4 percent.

The government said the higher wage is expected to attract more workers to the province, while providing certainty of costs for businesses.

“We fully understand that businesses are still hurting coming out of the pandemic and that workers, living in one of the highest living cost areas, are still struggling,” Bains told a news conference.

The B.C. Federation of Labour said it welcomes the news but noted that the minimum wage is “still well below a living wage, the amount a family needs to cover basic expenses.”

“Every worker should be able to earn a wage that makes their community affordable and livable, no matter where they live in B.C.,” Sussanne Skidmore, the federation’s secretary-treasurer, said in a news release.

But small companies say this is yet another financial blow from the provincial government that has already restricted business and increased taxes during the COVID-19 pandemic.

The wage increase on top of rising inflation could ultimately force small-business employers to cut workers’ hours or reduce the number of new hires for entry-level positions.

BC’s Minimum Wage Increase Will Lead to Labour Cuts, Higher Prices, Small Businesses Warn
A staff member prepares a dish at the Robba Da Matti restaurant in Vancouver, in a file photo. (Courtesy of Robba Da Matti)

You Can’t Keep Operating at a Loss’

Justin Tisdall, co-owner of Cross the Road Hospitality Group, employs around 30 people at three restaurants and lounges in Vancouver, including the popular eatery Juke Fried Chicken.

Tisdall says his business recorded profit margins of around 7 percent before 2020. But since the province raised health taxes in 2019 before the COVID-19 pandemic began, total operating costs have increased and are up about 20 percent today.

“You can’t keep operating at a loss, so you have to be creative to figure out what you need to do to survive,” Tisdall told The Epoch Times.

Rikkinen, who employs around 60 people, said he is currently raising prices on his menus for the second time since Christmas. He said the Russia-Ukraine conflict is further driving up food and energy prices to record highs amid the fastest-rising inflation rate for shelter costs in Canada since 1983.

He is still balancing his payroll budget following significant payouts for sick leave during the recent COVID-19 Omicron outbreak, after the provincial paid sick leave program kicked in on Jan. 1, he said. He added that his company has already had to adjust when the minimum wage increased on June 1, 2021, to $15.20 an hour, up from $14.60.

For small businesses, rising wages mean less hours for workers, and potentially fewer staff in the long run, and increases to the minimum wage don’t just affect entry-level workers’ pay, it drives up salaries for a company’s entire workforce.

“An increase of 45 cents per hour isn’t the real difficult aspect for a small business,” Rikkinen said. “What it does is it pushes up your entire cost structure because the skilled workers feel that they deserve an increase in salary relative to the entry-level workers.”

Rikkinen estimates that during the upcoming busy summer season, wage increases will cost his company up to $200 a day in operating costs.

To compensate, he said he’ll either have to reduce staff, employee work hours, or shifts. Another menu price increase is also on the table in June.

“I suspect what is going to occur are unintended consequences, where some of the least skilled workers in the province are actually going to be terminated,” Rikkinen said.

The policy will also force small businesses to hire fewer entry-level workers and redistribute their tasks to the existing employees instead, he added. That will end up hurting high school students, new immigrants, and others desperate for entry-level jobs the most.

Broader Impacts

As B.C.’s small businesses fight to remain viable, the province’s lowest earners also grapple with a higher cost of living.

A 2021 report from the group Living Wage for Families BC says two full-time working parents of two young children living in Metro Vancouver each needs to earn $20.52 an hour in order to cover basic expenses—including rent, child care, food, and transportation—once taxes, credits, deductions, and subsidies are taken into account.

Rikkinen argues that affordability issues in B.C. have been exacerbated by government policies during the pandemic such as COVID-19 restrictions on businesses and higher taxes.

“And the government is trying to address the consequences of their bad policy and a higher cost of living with worse policy,” he said.

BC’s Minimum Wage Increase Will Lead to Labour Cuts, Higher Prices, Small Businesses Warn
Justin Tisdall (L), co-owner of Juke Fried Chicken in Vancouver, in a file photo. (Courtesy of Juke)

Tisdall says he and his business partner are currently looking at removing labour-intensive menu items to save on payroll.

But consumers across the province will bear the brunt of the wage increase, with higher costs at the checkout counter, he predicts.

While he’s currently debating raising menu prices, Tisdall says he doesn’t want to drive away loyal customers.

“We’re just looking at different ways we can as an independent business stay competitive,” he said. “When people go to a large restaurant chain, they don’t care if they raise prices. But if we raise our price like a $1 on an item, people might be super upset.”

Tisdall said the government’s policies on top of rising costs have already driven away some people considering opening their own business.

While both entrepreneurs support fair wages, they note that the coming wage increase on June 1 could be potentially devastating.

“The number one thing for us is to make sure our staff are safe, and obviously keep them employed.” he said. “But if we don’t have a restaurant, they’re not going to be employed.”

Both Tisdall and Rikkinen, as entrepreneurs, say they’re eternal optimists and will continue to fight to balance their budgets while looking out for their staff’s best interests.

“Our employees are huge to us. You’re trying to build a small community within a greater community,” Tisdall said.

“So when there’s more and more barricades in front of you, it’s easier to take the easy route out. But that isn’t how we’re going to do it.”

Original link : BC’s Minimum Wage Increase Will Lead to Labour Cuts, Higher Prices, Small Businesses Warn