Alberta's minimum wage has been on the rise and is set to hit $15 an hour on October 1, 2018.
For some, it’s a long-needed move that will provide a little more income to the economically vulnerable; others see it as a tax grab that punishes entrepreneurs while failing to tackle the real issues.
“There are a lot of pros and cons and I think that's what makes it a contentious policy issue,” says Trevor Tombe, Associate Professor of Economics at the University of Calgary and Research Fellow with The School of Public Policy. “There are a lot of winners and losers and as with any policy change, governments need to trade off those costs and benefits.”
In Alberta, the climb to $15 began in 2015. Prior to that, the province had seen regular small increases with rates going from $7 in 2005 up to $10.20 in 2014 when the NDP restarted the living wage debate leading up to the 2015 election.
“Premier Notley was elected on the mandate to deliver a $15 minimum wage by 2018,” shares Ryan Eickmeier, Vice President of Government Relations and Public Policy with the Canadian Franchise Association. “While the increase in Alberta is significant, and it does put a financial strain on businesses in the province, you very much have to respect the will of the electorate.”
According to Eickmeier, although Alberta businesses may face some hardships moving forward, other political leaders have passed more drastic and unexpected policies.
“Premier Wynne in Ontario had previously set a policy to raise minimum wage alongside the rate of inflation, only to announce mere months before a 20 per cent increase that she planned to move the province toward $15 in a short period of time,” he explains. “The major difference to some is that businesses had some indication that it was coming in Alberta whereas businesses were blindsided by the increase in Ontario.”
Although Alberta’s wage changes have not been as drastic as Ontario's, which has set new historical records for minimum wage increases in Canada, the rate at which the province has chosen to increase wages will still create issues for businesses as they attempt to catch up.
“In our opinion, and the opinion of our members, the best way to increase the minimum wage is in a fair, predictable, and staggered manner over the course of several years,” states Eickmeier. “Businesses have the ability to absorb some cost increases, but most businesses don't have the ability to absorb significant cost increases in a short period of time. The best way to do it is to work with businesses, employers and employees to find a happy medium where the rate is rising but not at a rate that actually puts businesses out of business.”
Throughout the wage debate, businesses and experts have't failed to notice how politicized the debate has become. Amber Ruddy, Alberta Director for the Canadian Federation of Independent Business is shocked at the misconceptions around minimum wage increases and their effects on businesses in the province.
“I'm quite surprised how politicized it has become in other provinces. How some politicians are coming out and saying ‘well you should close down your business if you can't pay this minimum wage’,” she shares. “I think it's shocking to rather have people unemployed and whole businesses go under than to be able to provide people what they can in a small business [setting].”
According to Ruddy, it is not uncommon to see small business owners, which includes franchisees, working long hours and making below the minimum wage. Agreeing with this, several businesses that spoke with Alberta Venture shared personal examples of how low-profit margins impact them.
“Nobody can understand that sometimes we’re just doing this to pay our employees,” says Jack Wiersma, owner of the Drayton Valley Bakery & Café. “There’s no money at the end of the week, we’re working towards our targets but heaven forbid anything breaks down or somebody gets really sick and can’t come to work, but we deal with it and we keep plugging away.”
Wiersma says he already pays some employees $15 an hour and increases to the minimum wage have created situations that have forced them to assess whether new hires are needed, and also where wages will go for current employees.
Ruddy echoes this sentiment and says it’s something employers throughout Alberta are facing as a high median wage in the province has already created an economy that sees many businesses paying above minimum wage.
“It's not uncommon to find many places in Alberta that pay well above minimum wage,” she says. “Ninety five per cent of all businesses we have here are small businesses and already have the highest average weekly earnings. So for the businesses that already pay more they're going to be expected, in many cases, to top-up that salary to keep it competitive.”
For some businesses, this expectation is something they say is not realistic. Instead, they will work hard to ensure that their employees are receiving extra value from their employment even if it’s not financial.
“We definitely won't be able to afford to give raises as often, nobody will, so then you have to just create a better work environment,” says Kyla Kazeil co-owner of Edmonton based businesses The Common, 9910 Venue, The Bamboo Ballroom and The Bamboo Stockroom. “My strategy is to make a better corporate environment. It will be harder for companies to reward people for working hard, but I will probably just continue to try and really have a good corporate culture that’s fun, inclusive, empowering, and with cool training.”
“My strategy is to make a better corporate environment. It will be harder for companies to reward people for working hard, but I will probably just continue to try and really have a good corporate culture that’s fun, inclusive, empowering, and with cool training.” - Kyla Kazeil, co-owner of The Common and other Edmonton-based businesses
This idea of creating a better work environment is something that Kevin Kent, owner of Knifewear, instilled in his business from the very beginning. Dedicated to ensuring his employees never went without, he admits there were times in the past when he did himself but that it was all an investment that lead to success. The company pays above minimum wage and provides a number of benefit programs for employees.
“For us, it's the reason that we are succeeding,” he said. “We have staff that are engaged, we have staff that customers ask if they own the place and [the staff] says ‘no, I just pretend I do.’ But they feel that engaged that they actually give the impression that they own the business, that's how much they care and that's our success.”
“I've always believed that if you work a full-time job you shouldn't have to live in poverty,” Kent adds. “So I know a lot of businesses say that they're going to struggle, but there are always struggles in business and this is another challenge that we're going to be facing, but I hope it turns out to not be an issue.”
“I've always believed that if you work a full-time job you shouldn't have to live in poverty,” - Kevin Kent, owner of Knifewear Knife Store
One of the many challenges with owning a business is that no two are alike so best practices don’t necessarily work across the board.
“Every business is different and how the minimum wage changes affect them will depend on how the businesses themselves are responding,” says Tombe, explaining that the two industries most impacted are retail and hospitality.
Knowing all too well how different these impacts can be, Kazeil, who co-owns businesses in both retail and hospitality, says she believes the changes to the minimum wage will hit restaurants the hardest as they often already have very low-profit margins.
“On the hospitality side it's going to impact us massively because [minimum wage] was $10.80 and now it's going to be $15,” she shares. “We have a lot of servers and bartenders. For example, at The Common we have a staff of 40 and half of those are probably liquor servers, so with minimum wage increasing by essentially 30 per cent that brings up our [expenses] by that much. The cost of running a restaurant is really high so there's not a lot of profit. Many restaurants probably only look at a two to four per cent profit a year, so a lot of restaurants don't have that extra money and it has to come from somewhere.”
For some businesses, that money will come from reduced hours, employees, or benefits, while others will look to increase the cost for consumers.
A recent Bank of Canada estimate suggests that minimum wage increases throughout Canada may add about 0.1 per cent to inflation while shaving off around 0.1 per cent from Canada’s GDP.
Although Tombe says that on the national stage the impact will be modest, there are still other ways the government could look to help low-income earners, such as programs similar to GST rebates, without putting all the responsibility on one segment of the population.
“[These policies] are very effective at increasing income because it targets people who have low income and it doesn't come with the adverse employment effect because the costs are borne by society as a whole rather than the individual employer,” Tombe explains.
“The minimum wage is a very blunt tool and the other types of transfer programs can be more targeted, although they come at the cost of public dollars for required funding,” he adds.
Currently, it is estimated that roughly 11 per cent of Albertans work for or around minimum wage.