A recent report from the Canadian Federation of Independent Business (CFIB) suggests that implementing a $20 per hour living wage across Canada could significantly strain the economy and jeopardize the profitability of nearly 600,000 small businesses.
The study raises concerns about the efficacy of minimum and living wage policies in addressing the country’s affordability crisis.
According to CFIB, such a mandate would lead to an additional $44.9 billion in wage expenses nationwide. “Minimum wage and living wage policies often miss the mark when it comes to truly supporting the most vulnerable workers,” said Beatrix Abdul Azeez, a CFIB policy analyst. “Governments are setting these wages with no anchor in economic reality, relying on subjective and unpredictable criteria.”
The report, titled “Affordability, Minimum Wages, and Living Wages: Striking a Balance for Small Businesses,” examines the potential impacts of a $20/hour living wage proposal. It argues that traditional wage policies do not address the root causes of rising living costs while imposing substantial burdens on small businesses.
Economic impact by province
The report breaks down the projected costs and risks by province:
| Province | Cost (millions) | Small businesses at risk of unprofitability |
|---|---|---|
| Newfoundland and Labrador | $943 | 10,653 |
| Prince Edward Island | $332 | 3,100 |
| Nova Scotia | $1,933 | 14,048 |
| New Brunswick | $1,543 | 12,519 |
| Québec | $10,255 | 141,927 |
| Ontario | $16,741 | 200,387 |
| Manitoba | $2,748 | 23,485 |
| Saskatchewan | $1,823 | 18,432 |
| Alberta | $4,309 | 73,181 |
| British Columbia | $4,325 | 75,495 |
| Canada Total | $44,900 | 572,499 |
Unintended consequences of wage increases
The CFIB report highlights several unintended consequences of recent minimum wage hikes. It states that 60% of small businesses had to raise wages for other workers, and 59% increased their prices, contributing to inflationary pressures. Furthermore, 31% of small businesses reduced hiring for young and unskilled workers, and 25% cut overall employment.
“Canada’s cost of living crisis requires a more effective framework,” said Jairo Yunis, CFIB’s director for BC and western economic policy. He emphasized the need to ensure affordability for essentials such as rent, food, and gas, while supporting workers and small businesses through tax reductions.
CFIB’s recommendations
The CFIB offers several recommendations for mitigating the impact of rising wages on small businesses:
Tax and Payroll Cost Reductions: Reduce other taxes and payroll costs, such as small business tax rates, CPP, EI, and health/education payroll taxes.
Transparent Wage Setting Process: Establish a predictable and transparent process for setting minimum wages, reflective of market conditions and economic impacts.
Link Wage Adjustments: Tie minimum wage adjustments to private sector wage growth or a predetermined percentage of the median wage.
Address Affordability Crisis: Implement policies to increase the housing supply, reduce energy taxes, and eliminate trade barriers.
Targeted Fiscal Support: Provide fiscal support for vulnerable workers through reduced personal income tax rates, increased basic personal amounts, and expanded tax credits.
The Canadian Federation of Independent Business (CFIB) is the largest association of small and medium-sized businesses in Canada, with 97,000 members across various industries and regions. CFIB aims to enhance business success by influencing policy changes at all government levels, providing expert advice, and negotiating exclusive savings for its members. More information can be found at cfib.ca.