Editorial: Unintended consequences loom in minimum wage changes

Minimum wage increases could reverse the good course we were on.
Patrick Flannery
February 15, 2018
By
I heard an interesting statistic the other day on Fareed Zakaria’s excellent international affairs show on CNN. Between 2013 and 2016, income for the lowest 20 per cent of Canada’s wage earners increased 20 per cent. In the U.S., incomes for their lowest 20 per cent fell 16 per cent over the same period. 
I can’t lie, I felt a little surge of pride at having such a flattering statistic for our society read out on a national broadcast in the country that considers itself the greatest in the world.  

This improvement to the fortunes of our poor was achieved without any significant increases to welfare benefits. Yes, some social services that benefit lower-income families (affordable day care, for instance) have been introduced or expanded in various parts of the country, but the statistic addresses income, not wealth, and therefore isn’t affected by those programs. Essentially, Canadians in the lower income strata are finding more work, getting paid better or the lower-earning ones are somehow vanishing off the record and skewing the statistics. Our labour participation rate is not that different from the U.S.’s, so it’s not the latter. Somehow, we are doing a better at providing lower income jobs, helping people to get those jobs and/or maintaining and raising wages in those jobs.

There could be a lot of reasons for that and, since I’m not an economist, I won’t hazard a guess at what they are. It’s worth noting that the period covered by the statistic is after the Great Recession, so if anything the American numbers should have been improving. The point I’m making here is that these increases also occurred before the minimum wage hikes that have been proposed or implemented in various provinces (see our August 2017 issue).

Those hikes have been sold by their proponents as measures to help the poor. There’s no question that the statistic I’m admiring above will be improved even more in the short term once they take effect. My concern is whether they will undermine the factors that were causing us to do so well in the first place.

Companies like ours in the rental industry were already enthusiastically hiring lower-income workers and rewarding the good ones with raises. Our businesses have been growing – most stores I speak to report double-digit increases in their businesses the last few years. That means more jobs. Unless, of course, a sharp hike in the minimum wage causes you to look for other ways to support your growth. Maybe investing in some new software could allow you to streamline operations and do more with the same or fewer workers. Maybe you could focus your efforts to online sales and let counter staff go. Maybe you simply defer growth and keep the business the same size. However you decide to react, I don’t think I’ll be able to take the same pleasure from statistics like Zakaria’s the next time they come up.

If you are looking for productivity-enhancing solutions, may I suggest a visit to the Rental Mart on March 6 and 7. Rental stores all over the country tell me business is roaring. That makes this the perfect time to shop for new ideas and new solutions that could drive your business in a great direction. If labour costs and onerous regulations are about to become a challenge, now is not the time to sit on your hands and stuff money in the mattress. Upgrading and diversifying your fleet will drive new interest in your store and allow you to profit more from your rentals without having to add more people. And you can get more out of the people you do have by bringing them along and registering them for our free training sessions. See page 34 for more.  

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