Increased minimum wage will reduce poverty: Premier Christy Clark

By Stanley Tromp, Vancouver Courier, 13 Jan. 2012



For many workers, last Christmas was unlike any other they've known for the past decade. This time, they had a few more coins jingling in their jeans. That's because last May 1, the province's minimum wage rose from the lowest in Canada, $8 an hour, to $8.75. It was boosted again Nov. 1 to $9.50, and will climb again this May to tie for the highest in the nation, $10.25, equivalent to Ontario. The government also repealed B.C.'s seldom-used "training wage," a system whereby young employees were paid $6 per hour during their first 500 hours of work, and it set a separate wage for liquor servers to be $9 by next May. Farm workers got a break too: piece rates for hand-harvested crops rose by 9.4 per cent.


When announcing the change last March 16, Premier Christy Clark predicted the wage rise would reduce child poverty (although the government had insisted that few minimum wage workers were raising families), and could mean more than $4,000 extra per year for a full-time employee. "When workers have more money in their pockets, they are in a better position to support themselves and their families-and that's good for the economy," Labour Minister Margaret MacDiarmid told the Courier last month.


Just two days after being sworn in as premier, Clark forged her own new path, breaking from her unpopular predecessor Gordon Campbell. For stubbornly freezing the minimum wage for 10 years-while Vancouverites had the nation's highest cost of living and the average British Columbian was earning $23 per hour-he was widely criticized as callous, and the province a national embarrassment. Yet most B.C. chambers of commerce endorsed a wage raise during the consultations of fall 2010, and it seemed a need so obvious that most agree Clark had no political choice but to act. (This despite complaints from employers of overseas caregivers who worried they could no longer afford to pay for them. See related Courier story on nannies posted online.)


The public response was sharply divided, with most workers ecstatic and small business owners outraged, as shown in emails to the new premier (which the Courier obtained through the freedom of information law, with all names properly withheld for privacy). These ran 69 in favour of the raise and 38 against it, and although not a scientific poll, the notes reveal the strong emotions of hope and fear prompted by the change. Many workers sent comments like these:

. Being a single mom might just get a bit easier now that everyone will be able to have better wages.

. It brings great help to university students. Keep up the good work and NDP has no chance.

. My friends and I who are in our 20s and 30s are getting excited about the future of B.C.... You are restoring the faith of a whole generation!

. You have earned the respect and gratitude of many low-income British Columbians... You have my vote in the coming election Premier Clark!


 Yet from many small business owners there came a very different message:

. You have lost my vote Ms. Clark. And have probably destroyed my business that paid $250,000 in wages into my community last year.

. This increase will probably result in our special needs and work experience employees being laid off, as we will no

longer be able afford to be generous to any category of people who can't produce at optimum levels.

. This increase will make it impossible for us to compete with Asian-made products and will force my company to manufacture elsewhere.

. You have most likely just signed the Termination of Employment notice for a good portion of my staff. I will make sure to give you the credit.


The controversy is ongoing. This year the government will review the effects of the new policy, and whether the minimum wage will be regularly adjusted or tied to the cost of living. In the debates, two main questions arose. First, is the raise helping the low income workers it was designed for, or harming them if small companies can no longer afford to employ them? Second, will the higher minimum wage be used as a new baseline to leverage other wages upwards, and with what economic impact?

"We have to balance the needs of both employers and employees," Minister MacDiarmid said. "The last thing we want to do is to increase how much someone takes home, and then have them taking home nothing because they've lost their job. Some small business owners wrote to me to say it's made things difficult. But most of them are very respectful about the need for it. We introduced it in stages, and even business said that helps."

Amongst those who do support the wage rise, there is a wide range of opinions on just what it should be set at. Said one writer: "Too little, too late, Christy. $10.25 per hour would have been acceptable back in 2001. The minimum wage should be at least $12 per hour."

Another suggested: "Why wouldn't you start with something manageable like a 5 per cent increase with further increases linked to CPI?"

NDP finance critic Bruce Ralston said the NDP has no plan yet to push the wage higher. This year, B.C. Federation of Labour president Jim Sinclair will be pressing for an $11.25 minimum wage, a number he says the federal government set as the poverty line for Vancouver.

Inevitably, duelling studies emerged from the corporate-funded Fraser Institute and the left-leaning Canadian Centre for Policy Alternatives (CCPA). Both cited vast amounts of research on wages done across the continent to arrive at opposite conclusions.

The Fraser Institute predicted in a report last spring entitled the Economic Impact of British Columbia's Minimum Wage by Niels Veldhuis and Amela Karabegovic that the changes "will result in job losses ranging from 9,391 jobs to 52,194 jobs." (In fact, Karabegovic said the losses could be even worse, because only young workers were considered.)

"That warning is ridiculous," said NDP labour critic Raj Chouhan. "Since the wage went up in B.C., we haven't heard a single report of job losses, or business shut down. Not one. They always warn about that, but it never happens. In other provinces where the wage went up it didn't happen either." Sinclair agrees: "We used to have the highest minimum wage in the country in 2001, and it didn't cause any job losses then. Then they brought in that $6 training wage and youth employment actually went up."

The Fraser Institute also said that employers will respond to higher labour costs by cutting hours and hiring fewer people. "Instead of reducing poverty, minimum wage increases make low-income individuals worse off, mainly through a reduction in job opportunities," said Karabegovic. Yet despite repeated requests, she would not tell the Courier for how many more years the Institute would wish the $8 rate to remain, nor a specific figure on what minimum wage it would ever find acceptable.

In Australia, the federal minimum hourly wage is $15.51 (the Canadian and Australian dollar have almost equal worth), and with this high rate, tipping is not the expected norm. Canada does not set a minimum national wage rate, but the United States does, at $7.25 per hour, and Washington state is the highest paying state at $9.04 per hour.

All sides agree the economy is far too complex to isolate one factor-such as the minimum wage-as the main cause of workers' prosperity or loss. Other factors like the recession, HST, and resource markets are combined, and can be far more important.

"If you look at the employment data, you usually can't tell at what point the minimum wage changed, because it's a very small group that worked for those wages," said CCPA economist Iglika Ivanova, author of Myths and Facts about the Minimum Wage in B.C. "We lose jobs if the overall economy is bad, not because of the wage. And in all times companies are looking for ways to cut costs."

The sector most affected by the minimum wage rise is clearly the restaurant industry, which employs about 170,000 people in B.C., including 75,000 youth. The increase to $10.25 will cost the industry an estimated $295 million in added payroll costs, asserts Garth Whyte, president of the Canadian Restaurant and Foodservices Association. "Restaurant owners will have to cut hours and hire fewer people, and that has happened. And the worst hit will be youths looking for their first job. But we will adapt."

Ian Tostenson, president of the B.C. Restaurant and Food Services Association, mainly agrees. Yet asked if he would want the wage frozen at $8 forever, he replied, "I don't know, that's a tough one."

"I get what Christy is doing and I applaud her," added Tostenson. "But maybe let's take a bump to $8.75 or $9, and then let's work together each year, and see what industry can absorb in these hard economic times."

Although fears of job losses are likely overstated, one prediction does seem borne out in fact. Tostenson says that to save money, many restaurants are combining jobs, such as asking a hostess to work as a busboy as well. Indeed, a food server complained to the Courier that she now had to wash dishes also, that is, do 1.5 jobs for the same pay.

The second question is the potential trickle-up effect of the minimum wage raise on the entire workforce. Statistics Canada said that only 2.3 per cent of British Columbians were earning the rock bottom wage of $8 in 2009, and these were mostly students or youths living at home with their parents. The larger impact would be on the quarter-million people making between $8 and $10 per hour.

But indirectly, the B.C. Chamber of Commerce's biggest concern is that workers and employers use the minimum wage as a baseline, and an increase to it will psychologically leverage the overall expectations upwards. As one writer to the premier put it: "You have to think this proposed move right through to the end. The $8 man goes to $10, the $10 man is going to want at least $12, then the $20 man is going to want $25..."

"We have no evidence of that leveraging happening, and you won't see it for some time," Sinclair countered. "And it's not a crime for poor people to have higher expectations. If the market can bear it, it will. It gives workers more buying power, and by the way, they don't have a tax lawyer hiding their extra money in Switzerland. It's all going back into the local economy."

In the end, for Ralston, the wage raise's benefit is far more than financial: "It's an affirmation that your work has value." Yet a few writers wrote to the premier patronizingly about young workers, scornful of their opinions and abilities, and distrustful of ways they might spend their new wages. "It costs $3,000 to recruit and train a suitable entry level employee yet many people in that age group (and lower skill set) quit their jobs at a whim-parents are paying for a vacation, a rock concert they have to attend, their 'only chance' at travel, etc." Said another: "Wow, thanks SO much for the minimum wage increase. I look forward to paying badly educated, unmotivated people far more than they are worth."

Then came the direst prospect: "As I sit in a local restaurant eating my food yesterday I heard the owners a little upset about the increase, and within minutes I heard two employees on their way out say 'Yahoo, baby, that's more money for WEED.' Yes, they said weed, not to make ends meat [sic]."

Yet about twice as many writers voiced their elation, as though such low-wage workers now felt respected. One teen wrote on the raise: "I am extremely happy to hear this because I am a 15 year old that is very interested in politics. I want to be a politician when I grow up and I always thought that would be the first thing I would change. I can tell you will do a great job as premier."

This was echoed by an 18-yearold worker in a coffee shop chain: "When I received a message over Facebook about your increasing the minimum wage to $10.25, my heart soared. I could not be any happier for those younger than me, as well as middle aged and on who work in these businesses. They will finally receive the recognition they deserve for doing a hard days work, in a job that is considered low-life, and is shoved off and ignored. With this increase, you made our day, you made our week, you made everyone smile."



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