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November 2nd, 2016 ~ Vol. 85 No. 47
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Economist and minimum wage issue
Crowsnest Pass Herald Front Page
Stock photo
EZRA BLACK
Pass Herald Reporter
In an interview with the Pass Herald, a Calgary-based economist Trevor Tombe, said raising Alberta’s minimum wage would force small businesses to raise their prices.

On Oct. 1, Alberta’s general minimum wage increased $1.00 to $12.20 per hour. In addition to the 2016 increase, the general minimum wage will rise by $1.40 to $13.60 per hour on Oct. 1, 2017, and a further $1.40 to $15 per hour on Oct. 1, 2018.

By studying past minimum wage increases in the United States, Tombe predicted the higher costs of labour would be passed onto Alberta’s consumers.

“We see that the price increase does occur and that buffers almost all the effect of the increased labour cost,” he said.

Tombe explained that a firm’s ability to change its prices depends on its competitors.

“In smaller communities it may very well be that there’s only the one local bar or the one small restaurant where the competition that they face won’t be another local business but people just not going out to eat and cooking more at home,” he said.
continued below ...
There are a number of alternatives to increasing minimum wage if the goal is to provide support to lower income individuals, he said.

They include raising the personal income tax exemption, which is the basic amount of income on which no tax is paid. Or the government could provide direct wage supports, he said.

“If it’s truly a problem that we want to address collectively as a society, you can do it by providing direct cash transfers,” said Tombe. “We do that currently for low-income families with children. If there’s a concern that that cash transfer through the Alberta Child Benefit is too low, then we could increase it. That would be something that wouldn’t burden individual businesses but would come out of the general tax base overall.”

Tombe suggested a government led wage subsidy program would draw people into the labour force, rather than push people out like an increased minimum wage might.

“There’s certainly more than one instrument we can talk about here,” he said.

Local businesses and industry groups have criticized the increase for being too drastic and poorly timed.

Steve Atkinson, owner of the Stone’s Throw Café, said he would respond to the increase by hiring less staff and curbing business hours.

Increasing prices was not an option, he said.

“I can’t charge more for what I’m providing,” he said. “If I jack up prices I’ll start losing customers, which means we’ll lose business, so I have to make changes elsewhere.”

Effective November 1, the Stone’s Throw Café will be open fewer hours per week.

“We just have to adjust, I have to make a living and I’m not in business to fail,” said Atkinson.
continued below ...
Brad Clark, owner of Popiels Restaurant, said he would not be hiring as many employees for the coming summer because of the wage increase.
He also said he might have take more complicated dishes off his menu to reduce the number of hours he pays his kitchen staff.

Raising prices is also an option, he said.

“It’s like anything else,” said Clark. “When the price of beef went through the roof, I had to raise the price of my steaks.”

The Canadian Federation of Independent Business (CFIB) is opposed to the minimum wage increase.

CFIB said the provincial government enacted this policy despite the potential for 50,000 job losses in an already shaky provincial economy, it said in a statement.

“Alberta’s small business confidence is low and sectors such as retail and hospitality will be hardest hit by this unprecedented increase,” it said.

In their statement, the CFIB said job losses from minimum wage increases could take the form of hiring freezes, slower employment growth, or direct job cuts.
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November 2nd ~ Vol. 85 No. 47
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