The minimum wage in B.C. will increase to $11.35/hr in mid-September. - Image Credit: Fraser Institute

Absorbing a higher minimum wage

Okanagan businesse advocate for reductions in other operating costs

The Okanagan business community is largely supportive of the minimum wage increase initiative adopted by the provincial government.

But the need for advance notice of wage increases along with reduced taxation and service costs to balance against increased labour costs are also being encouraged.

“Businesses want predictability so that their annual budgets and plans don’t take an unanticipated hit,” said Tom Dyas, president of the Kelowna Chamber of Commerce in a news release this week.

“The bottom line for business is taking the politics out of minimum wage increases.

“We are strong supporters of businesses as engines of employment. Reducing the small business tax in last week’s provincial budget from 2.5 to two per cent was a positive note.

“This takes money the business was paying in tax, and returns it to the business owner to spend as needed.”

Also helping businesses in the budget were proposals to remove the PST on electricity and the rollback in MSP premiums paid by employers on behalf of their workforce, Dyas noted.

The minimum wage in B.C. will rise by 50 cents to $11.35 an hour.

These wage changes will come into effect in mid-September of this year.

The province says the upgraded minimum wage is based on a 20-cent increase based on B.C.’s 2016 Consumer Price Index (CPI), the variation in prices paid by typical consumers for retail goods and other items, plus an additional 30 cents.

The minimum wage had most recently been raised to $10.85 in September, 2016.

Dyas said the Kelowna Chamber supports future increases to the minimum wage tied to the CPI.

Michael Magnusson, president of the Penticton Chamber of Commerce, echoed Dyas’ sentiments about predictability in minimum wage increases.

“Certainly all employers and business owners feel their workers deserve a fair living wage but we don’t want to see little or no notice given before a wage rollout is put in place,” said Magnusson.

“The first one that saw an increase from $10.40 to $10.85 came with little notice, and our concern is that we have to budget for a year ahead looking at cash projections and cost of labour.

“If you are a business operating on a slim margin of profit, any sort of increase is going to affect your bottom line so that has to be accounted for.”

Magnusson said increasing labour costs will hurt some small businesses on those tight operating margins, which might force the owner-operators to work more hours to reduce employee costs.

He believes the ultimate solution to minimum wage concerns is investment in education to allow workers to develop job skills that will qualify them for jobs that pay higher wages.

“With minimum wages, you also have to consider that young people in those jobs are often still living at home. For a 16-year-old working a minimum wage job, it’s all gravy as that wage isn’t about supporting themselves but rather their lifestyle at that moment in their lives,” Magnusson said.

Elfriede Schmoll, co-chair of the Westside Board of Trade, said their members knew this was coming, and the blow has been softened a little by what have been two strong economic years and the anticipation of a third in 2017.

“Tourism has been very strong the last two years so everyone benefits from that in one way or another in our area,” Schmoll said.

“But we have many small businesses here so any increase in operating costs will have to be absorbed somewhere. Some might complain about it but that’s how it’s going to be so we just move on.”

Ian Tostenson, president/CEO of the B.C.Restaurant and Food Services Association, says adjusting the minimum wage from his industry’s perspective is a delicate balancing act.

“You want to be in the right spot so that you aren’t getting too much admiration about it from either side of the argument,” Tostenson said.

He said the provincial NDP proposal to increase the minimum wage to $15/hr would be “brutal” on the restaurant business if sales can’t be increased to off-set the added labour cost. The Kelowna Chamber is also against an absolute increase to $15, regardless of how much notice is given.

Tostenson said another aspect of the debate is businesses increasing their reliance on technology where possible to reduce the need for manual labour.

Tostenson said he is also keeping an eye on the impact felt in Seattle’s business community as the Washington city’s ordinance to reach the $15 minimum wage.

Starting as of April 1, 2015, Seattle businesses with fewer than 500 employees will have to reach the $15 an hour wage mark in seven years, by 2021, while employers with 500 or more employees must reach that level in three years.

The University of Washington is carrying out a study over that period to analyze the impact of the minimum wage change in Seattle.

The first year response from 567 randomly selected Seattle businesses reported that 62 per cent said they expected to raise prices for goods and services to accommodate the higher labour costs.

While many responders hoped the higher wages would improve worker morale and boost job application interest, few felt it would improve individual employee productivity.

“Our preliminary analysis of grocery, retail and rent prices has found little or no evidence of price increases in Seattle relative to the surrounding area,” stated the report.

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