A minimum wage of $20/hour would represent a cost of $44.9 billion and threaten the survival of nearly 600,000 Canadian businesses

A minimum wage of $20/hour would represent a cost of $44.9 billion and threaten the survival of nearly 600,000 Canadian businesses
A minimum wage of $20/hour would represent a cost of $44.9 billion and threaten the survival of nearly 600,000 Canadian businesses

MONTREAL, May 15, 2024 /CNW/ – Mandatory payment of a living wage of $20/hour in all provinces would cost $44.9 billion more in wages, according to a new report from the Canadian Federation of Independent Business (CFIB). and could harm the profitability of nearly 600,000 businesses. In Quebec, this would represent a risk for 141,927 SMEs and a cost of $10.25 billion.

Contrary to popular belief, raising the minimum wage is not a miracle solution to the country’s affordability crisis. Benjamin Rousse, policy analyst at the Canadian Federation of Independent Business, presents preconceived ideas about the minimum wage as well as alternative recommendations to deal with the increasing cost of living.

The report entitled Affordability, minimum wage and living wage: finding the balance for SMEs analyzes the impact of increasing the living wage to $20/hour, a proposal being considered by some groups. The report shows that governments need to take a new approach to solving affordability problems. Indeed, not only do traditional minimum and living wage policies fail to address the root causes of the rising cost of living, they also drive up operating costs for SMEs.

“Often in the country, minimum wage setting policies do not take into account economic reality and are based on subjective and unpredictable criteria. Governments should focus on a pragmatic approach that would help workers cope with the increasing cost of living without increasing the burden on SMEs. Adopting a minimum wage of $20/hour would have the most harmful consequences for citizens and the economy,” underlines François Vincent, vice-president of Quebec at the CFIB.

Cost of mandatory payment of a living wage of $20/hour, by province

Province

Cost ($M)

Number of SMEs that
could become no
profitable

Newfoundland and Labrador

$943

10653

Prince Edward Island

$332

3100

New Scotland

1$933

14048

New Brunswick

1$543

12519

Quebec

10$255

141927

Ontario

16$741

200387

Manitoba

2$748

23485

Saskatchewan

1$823

18432

Alberta

4$309

73181

British Columbia

4$325

75495

Canada

$44,900

572,499


The negative impact of minimum wage increases

Recent minimum wage increases have forced 60% of SME owners to increase the pay of other employees and 59% to increase the price of their products/services, which only fuels current inflationary pressures. Additionally, 31% said they hired fewer young or inexperienced people, and 25% said they reduced their staff. This data highlights the need for a more nuanced approach to wage policies that takes into account their impact on workers and businesses.

“The affordability crisis Canada requires a more effective framework: we must ensure that the price of rent, groceries and gasoline are stable and affordable while supporting workers and SMEs by lowering their taxes. These measures would greatly help the most vulnerable people,” says Benjamin Roussepolicy analyst at CFIB.

CFIB recommends that governments take the following actions:

  • Mitigate the impact of minimum wage increases on SMEs by reducing other payroll costs and taxes (e.g., small business tax rates, Canada Pension Plan Canadaemployment insurance, deductions relating to health or education, etc.).
  • Establish minimum wage setting frameworks that are predictable, transparent, reflect market conditions and take into account economic impacts.
  • Tie minimum wage adjustments to private sector wage growth or a predetermined percentage of the median wage.
  • Address the root causes of the affordability crisis by adopting policies to increase the supply of housing, reduce energy taxes and remove barriers to interprovincial and international trade.
  • Find more targeted ways to support vulnerable workers (reducing personal income taxes, increasing basic personal exemptions, and expanding tax credits).

Click here to view the report.

About CFIB

The CFIB (Canadian Federation of Independent Business) is the largest group of SMEs in the country, with 97,000 members in all sectors of activity and all regions. It aims to increase the chances of success of SMEs by defending their interests with governments, providing them with personalized resources and offering them exclusive savings. Visit fcei.ca to learn more.

Source Canadian Federation of Independent Business

Information: Maud Larivière, press officer, FCEI, Tel. : 514-861-3234 (ext. 1808) | Cell. : 514-817-0228, [email protected]

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