Mandating a $20/hour living wage could push 75,500 BC small businesses to the brink of closure

CFIB’s new report highlights flaws with minimum and living wage policies

Vancouver, May 15, 2024 – Mandating a $20 per hour living wage in British Columbia would cost the province’s economy $4.3 billion in extra wages and put up to 75,500 small businesses at risk of becoming unprofitable, finds a new report by the Canadian Federation of Independent Business (CFIB).

The report, entitled “Affordability, minimum wages, and living wages: Striking a balance for small businesses,” analyzes the impact of a $20/hour living wage, a proposal under consideration by several organizations. The report finds that governments need a new approach to address affordability challenges as traditional minimum wage and living wage policies are insignificant in addressing the root causes of the rising cost of living while simultaneously increasing costs on small businesses.

"Policies on minimum wage and living wages fall short when it comes to supporting the most vulnerable workers. Governments determine these wages without a firm grounding in economic reality, relying on subjective and unpredictable criteria,” said Jairo Yunis, CFIB’s Director for BC and Western Economic Policy. “Rather than relying on these blunt tools, governments adopt a new approach that ensures workers can manage the rising cost of living, while also safeguarding small businesses from being unfairly burdened.”

Instead of using a one-size-fits-all approach with mandatory wage policies, 8 in 10 small business owners agree that governments should improve affordability by reforming the personal income tax system so low-income earners can retain a larger portion of earnings. Other support measures include increasing housing initiatives (60%), reducing fuel and carbon tax rates (67%), and providing targeted support to low-income earners (59%).

The cost of adopting a $20/hour living wage in each Canadian province

Recent minimum wage hikes forced 64% of BC small businesses to raise wages for other workers and 61% of them to raise prices, contributing to current inflationary pressures. In addition, 31% of BC small businesses had to cut back on hiring young and low-skilled workers, with 26% of them reducing overall employment. These findings underscore the need for a more nuanced approach to wage policies that consider the diverse impacts on both workers and businesses alike.

"Canada's cost of living crisis requires a more effective framework: making sure rent, food, and gas prices are affordable and stable while extending support to workers and small businesses through tax reductions,” added Yunis. “This would go a long way in addressing BC’s affordability shock.”

CFIB recommends that governments:

• Alleviate the impact of rising minimum wages on small businesses by reducing other taxes and payroll costs (such as small business tax rate, CPP, EI, health/education payroll taxes, etc.)
• Establish a minimum wage development plan that is predictable, transparent, reflective of market conditions, and mindful of economic impacts.
• Link minimum wage adjustments to private sector wage growth or a predetermined percentage of the median wage.
• Address the root causes of the affordability crisis by enacting policies to increase the supply of housing, reduce energy taxes, and remove interprovincial and international trade barriers.
• Provide targeted fiscal support for vulnerable workers through reduced personal income tax rates, increased basic personal amounts, and expanded tax credits.

Read the full report here.

For media enquiries or interviews, please contact:
Dariya Baiguzhiyeva, CFIB
647-464-2814
public.affairs@cfib.ca 

About CFIB

The Canadian Federation of Independent Business (CFIB) is Canada’s largest association of small and medium-sized businesses with 97,000 members across every industry and region. CFIB is dedicated to increasing business owners’ chances of success by driving policy change at all levels of government, providing expert advice and tools, and negotiating exclusive savings. Learn more at cfib.ca.