Minimum wage,
Maxime carnage

DEC: How Christy Clark has turned the miracle

of the long-awaited wage hike into a potential
disaster for students and the B.C. economy

By Knowlton Thomas

for this paper back in 2009. It was
about the Harmonized Sales Tax,

and seriously questioned the method by
which then-Premier Gordon Campbell
implemented it. The move, as my article
forecasted, was devastating — both to
B.C. residents and to Campbell’s political
career.

After a long overdue resignation
by Mr. Campbell in early November
of last year, Christy Clark was recently
appointed his successor. Clark, like
nearly every politician does, promised
change. And she, like Campbell, did so:
only a couple of weeks into her stint as
this province’s premier, she has make
a quick, bold move that, like the HST,
will shake the very foundations of B.C.
You’ ve probably heard it by now: Clark
announced that the minimum wage is
being raised from $8.00 to $8.75 in May,
and will be up to $10.25 by May of next
year. That’s correct. A 28 percent wage
hike in a single year.

So we must once again ask the
question: is this a good move or bad?

Well, first of all, the students of
Douglas will answer with a resounding
“YES!” This is expected, of course. But,
like most things in life, this change is not
so simple. There are implications —a large
stone has been thrown into a big pond,
and most everyone will feel the ripples
whether they see them coming or not.

The potential negative consequences
of this decision are significant. It begins
with business, and the rules of business
are basic. Some points to consider: First,
the purpose of a company is to generate
profit (or break-even if it’s an NPO).
Second, profit is the result of taking a
company’s net earnings and deducting
from that number the company’s net
costs. Third, the wage of a company’s
employees is a component of its net costs.
Which loops us back to Clark’s move and
my fourth point: this wage hike increases
the costs of the operations of many
businesses in our province.

[&= the very first article I wrote

12

Now, you may not care about
this. After all, you’re probably not a
shareholder in the company, so why worry
about its profit? As long as you get your
paycheque, right? Wrong, unfortunately.
See, the company you work for is going
to want to maintain its profit margin
(if not constantly strive to increase it).
Therefore, if a hike to the minimum wage
increases a company’s costs in that area, it
will look to cut costs in another area. This
may affect you indirectly, such as lost
opportunities for promotions and raises,
or directly, such as lost hours or even
layoffs.

The other indirect negative
implication this wage hike could have
on students (and all consumers, for that
matter) is raised costs. Take grocery
stores, for example. Most of them pay
the vast majority of their front-end and
ground-floor staff minimum wage or
close enough to it. If everyone suddenly
gets a 28 percent raise, the cost of doing
business goes up—and if they don’t cut
hours or lay people off, they’ll simply
raise the costs of their products. This will
apply to many other types of companies:
coffee shops, pubs and restaurants,
retail outlets, convenience stores, banks
and credit unions, etc. Anywhere you
can think that pays at least some of its
employee base minimum wage or even
remotely close to it, costs may very well
go up. And trust me, this is virtually every
business, because the ripple effect will see
people making as much as $20 or more
per hour ask for raises; the uppers will
not want to see entry level staff get a 28
percent raise while they get nothing.

Christy Clark isn’t completely
stupid. She knows businesses need
such substantial raise hikes to occur
transitionally, which is why she is
executing the hike over multiple
increments. But it’s still a bad mix, like
water and oil: one year is too short, and
28 percent is too much. Such a hike
should transition over at least two years.
The increments will ease the pain slightly,
but it’s like B.C.’s economy taking one
pain killer when it needs at least two or

three—the headache is still apt to be felt.
All of this granted, let’s not act like
the world is over. The B.C. economy isn’t
going to collapse; it’s taken harder blows
in the past. And, potential cutbacks in
hours and staff aside, students stand to
benefit the most: many currently work
for between $8 and $11 per hour, so in
a little over a year; they’re all going to
make a fair bit more. As mentioned,
some may lose hours, some may get laid
off, and that’s very tragic. But it’s not
the Great Depression. Most businesses
will absorb the shock of raised costs
or cut back in areas that don’t affect
employees or consumers as directly. As
long as students can land jobs in what
will become a tighter, more competitive
space, they will be reaping the benefits of
a groundbreaking, meteoric wage hike.
Our best idea of knowing whether
this will work is a simple cross-country
comparison. Do so, and you realize
we’re long due for this change—it’s
been a remarkable ten years since B.C.’s
minimum wage was last raised, and in
that time, costs of tuition and virtually
everything else has climbed substantially.
Even with the 28 percent hike, $10.25
is not an extraordinarily high minimum.
In Newfounfland, the minimum wage is
already $10, and in Ontario, it’s already
$10.25. And, not that job prospects are
bright there, but Nunavut has Canada’s
highest minimum wage at $11. In fact,
at $8, B.C. pays its workers the lowest
minimum wage of all! The second lowest

 

is nearly a dollar higher (Alberta at
$8.80). If the rest of Canada can handle
these wages, so can B.C. The only
question remained to be answered is how
rough this shift will be.

Initially, we’re probably looking
at a shaky transition, but over the long
term, Clark’s move is both necessary and
positively impacting.

SIDEBAR: Farewell to the training wage,
and good riddance!

Minimum wage controversies aside,
one good thing Clark did in relation
to this move was abolish the “training
wage.” This wage was $6 per hour for
employee’s first 500 hours of working
a job (should the employer choose to
implement it). That is more than four
months of working full time! And you
would make a pathetic $240 per week,
maximum, before deductions— which
would equate to a paltry $12,500 annual
salary.

These numbers are scary enough, but
they probably don’t even apply to you.
If you’re a student, you’re more likely
working eight to 20 hours per week, in
which case breaking out of this poverty
could take anywhere from eight months
to over a year. The training wage was
an insulting, unacceptably low form of
compensation for absolutely any job, and
no negative implications will arise from
this abolishment—any business relying
on this option to maintain profits should
probably revisit their finances.