CANADIAN FEDERATION OF INDEPENDENT BUSINESS
10130 – 103 Street, Suite 1310 Edmonton, Alberta T5J 3R2 Telephone: (780) 421-4253 Fax: (780) 429-9619 www.cfib.ca
Hon. Roger Allen Minister of Justice Government of Northwest Territories Box 1320 Yellowknife NT X1A 2L9 OPEN LETTER Dear Minster Allen,
August 28, 2003
On behalf of the small- and medium-sized business members of the Canadian Federation of Independent Business (CFIB) in the Northwest Territories (NWT), I am writing to express our strong concerns with your government’s decision to raise the NWT minimum wage to $8.25 per hour, effective December 28, 2003. CFIB was not only startled by the magnitude of the increase (ranging from 18 to 38 per cent), but by the lack of consultation and the swiftness in which this change was made. While CFIB recognizes that there has been no increase in the NWT minimum wage since 1992, the length of time since the last increase should not be the primary motive to increase the minimum wage. It is also important to recognize that while the minimum wage may not have increased since 1992, average earnings in the NWT have risen from $30,071 in 1996 to $36,645 in 2001 for an average increase of about 4.3 per cent per year over those 5 years (source: Stats Canada). And despite a lower minimum wage than some other Canadian jurisdictions, NWT continues to have the highest average earnings per capita in Canada. As your government did not do any consultation or research on the potential impacts of such an increase, CFIB sent an email to NWT members asking for feedback on the possible effects of the minimum wage increase. The purpose of this letter is to provide you with their feedback so it may be considered over the coming months, and in future considerations of the minimum wage. MAJORITY ALREADY PAY HIGHER THAN MINIMUM WAGE When NWT members were asked about the impacts a minimum wage increase will have on their firm, the majority responded that it would have little impact as they already pay higher than minimum wage in order to attract and retain employees at their business. This is a natural outcome during a time of labour shortages and a booming economy, making it less relevant to have to increase minimum wage by such a substantial amount. I never start anyone in a job at less than $10.00/hr. I find I need to pay that much to keep good people. Publishing company …all employees are paid higher than this so we have a better chance of keeping them once they are trained…Any true northern business knows they cannot get away with paying minimum wage when we are constantly competing with Government wages of $23.04 minimum to start for casual labour. Hardware retail business owner This increase will make absolutely no difference to us at all. Our minimum wage for labourers here is $12 per hour so … I can’t imagine there is anyone up here, other than summer students, who might work for that kind of wage. Construction business owner MINIMUM WAGE IS MOSTLY PAID WHILE TRAINING YOUNG WORKERS About one-third of respondents to CFIB’s email inquiry, however, expressed strong concerns with the government’s decision to increase the minimum wage to $8.25/hour. Some of the concerns came from respondents who hire primarily young people and often use the minimum wage as a starting base while
a new employee is in training and gaining experience. The logic is that new employees are not yet fully productive and must be trained to reach full productivity. During this training process, firms often increase wages gradually to provide the employee-in-training with some incentives. Many of those who responded to the CFIB survey and hire young people, start them at minimum wage but then increase their wages over time as they become more productive. It is rare that an employee will remain on minimum wage for an extended period of time. We have 2 employees who work at minimum wage. They start working for us in grade 10 and continue until grade 12. They start at $6.50 and get a raise every year of $0.50 so when they leave, they are working for $8.00/hour….I also feel that our student workers are not worth $8.25 as they need a great deal of training. By the time they leave us, they are worth that but definitely not to begin with. Retail business owner I am usually willing to hire students who have little or no work experience to stock shelves, provide janitorial services (sweeping, dusting, washing), help with the freight, and general customer service. These students are 14 to 17 years old and are definitely not “worth” $8.25 per hour for the services they provide when they are initially hired. As they prove they are responsible by being reliable (arriving on time or arriving at all), show initiative to work without constant direction, have a willingness to learn, are trustworthy and dependable, I am quite willing to give them raises in salary….my current student employees will be “worth” the salary of $8.25/hour in four months. Food retail business owner We have a theater operation that employs quite a few students and we have tried to pay higher than minimum wage for all our starting employees…We recently increased all our staff at the [operation] to $0.50 per hour above minimum wage for all starting staff, and after their 6 month anniversary then we generally increase [again]…therefore this new increase will have quite an [impact]. Entertainment business owner MINIMUM WAGE INCREASE MAY NEGATIVELY IMPACT YOUNG WORKERS Those firms hiring young people at minimum wage face dramatic increases in their labour costs at the end of 2003. Some are already preparing by making plans to reduce the number of youth they hire, effectively lowering the opportunities available for young people to gain valuable work experience. With an NWT youth unemployment rate that is about 18 per cent, which is more than double the general unemployment rate of 8.3 per cent (July 2003), a minimum wage increase will do very little to encourage firms to hire more young/inexperienced workers. In fact, it would not be surprising if the youth unemployment rate actually increased as result of this change, which is a well-documented consequence of increasing minimum wage. The rise in wages is definitely going to affect us. We are planning on either letting one student go or reducing their time on the job. Retail business owner I will DEFINITELY be less inclined to hire students to work in my business…As a business owner it is vital that my expenses (and that definitely includes wages) are worth the return to the business…After Dec 28/03, I will most likely consider students with proven work experience or mature employees whom I would normally hire at, or above, the proposed minimum wage. Food retail business owner MINIMUM WAGE INCREASE WILL ADD PRESSURE TO INCREASE WAGES OF ALL WORKERS Also of concern, not only to those firms who hire young people at minimum wage, but to many other firms, will be the pressure to increase wages of all employees in order to maintain wage differentials based on work experience/seniority. Many in the business community foresee an expectation among employees who make more than minimum wage to also receive a wage increase, adding even greater labour costs to many small- and medium-sized firms across the Territory.
This raise in the minimum wage (we only pay our students minimum wage) will affect what we pay our adult employees. Our adult casual workers are being paid $10.00 per hour which means when our students get a raise we are going to have to raise their wages too. Retail business owner This will have a negative impact because although none of our employees are at minimum wage, there is an expectation that wages generally would increase by $1.25 per hour. If an employee is making $9.00 per hour ($2.00 over minimum wage) he or she would expect to maintain that difference over a new hire probably because of experience. This will have an even greater effect on those employers that have policies that pay employees on a graduating scale based on a percentage over minimum wage. Accommodation business owner My business does not employ anyone at the minimum wage…That being said, since many people gauge their wage requirements based on other wages available, the fact that the minimum wage has increased so much may tend to increase the expectations of people in the labour market as to appropriate levels of wages for lower level jobs…I do not normally give a wage increase of this large of an increment at one time and to do so would upset my expectations re budgeting for the coming year substantially…I expect that my lower wage employees will expect higher wages as a result of this change…since I will not be able to pass on the additional costs, this will cut into my bottom line. Computer/business services owner DO NOT OVERLOOK THE INDIRECT IMPACTS OF A MINIMUM WAGE INCREASE Still other firms worry less about the direct impacts, but have concerns with how an increase in minimum wage may affect them indirectly. Most of the firms expressing this concern work closely with other business and are worried about the ability of their small-and medium-sized business clients to continue to purchase their products and services to the same degree. Impact will be…indirect and difficult to quantify. Communications business owner No direct impact, but certainly an impact on the ability of small businesses to afford a fnancial i consultant/advisor. Our business suffers if small businesses cannot afford to have a qualified accountant prepare financial statements and tax returns. Accounting business owner CONSULTATION CONSIDERED INTEGRAL; LACK OF IT SEEN AS INSULTING TO BUSINESS Regardless of their response as to whether a minimum wage increase will have an impact on their firm, those responding to the CFIB survey were in absolute agreement that the territorial government should have first consulted with the business sector on this, or any other issue, that directly influences the operation of a business. This lack of consultation has been noticed by the NWT small business community and reinforces the “poor” rating the majority of our NWT members ranked this government in its understanding of entrepreneurship in a previous CFIB survey. It is outrageous that a law such as this can be passed without any consultation. I don’t necessarily think that the government will always follow all of the advice of the business community, but to not be consulted at all shows a blatant lack of respect to people who are trying to generate non-government funded jobs in this region. Business service owner Generally…[we]…object strenuously to the way the Government implemented this change. While notable by its absence, consultation should have been done on this and all such similar issues. This should be real consultation, not simply asking the question and not listening to, or waiting for feedback, before decisions are made... Construction business owner
Consultation is the backbone of consensus government…but this government will apparently never learn. The government has no idea what the long-term effects of making these types of decisions will have on small business, the public and especially the employees. Accommodation business owner This Government has become increasingly insular and secretive of their agenda. Our only hope lies in an election in the fall. The idea of open and transparent government is a thing of fairy tales to this Cabinet. Communications business owner SUMMARY AND RECOMMENDATIONS In summary, these responses indicate that such a large minimum wage increase at one time will have an immediate negative impact on those NWT firms that hire young/inexperienced people and will likely discourage some firms from hiring as many, if any, students in the future. Also critical to many firms will be the growing pressure to increase the wages of ALL employees as many workers may well expect an increase similar to the one being proposed for the minimum wage. In addition, some firms worry about the indirect impacts because their business may rely on a healthy small business sector. If their small business customers struggle with wage increases, they may not necessarily be able to afford the same products and services that they have in the past. While the changes to the minimum wage are of concern to some, it is the lack of consultation that is the biggest worry to many in the NWT small business community. The swiftness with which a change of such a magnitude was made to the minimum wage, without any consultation, seems to confirm to many small- and medium-sized business members that the territorial government does not understand, nor respect the NWT business community. Many had strong words for the current government and MLAs should seriously consider these concerns in the months leading to the territorial election. A majority of NWT members do not believe that they will feel any direct impacts from a minimum wage increase, however, among those that would, the impact could be quite severe. To lessen the severity of the impact, CFIB recommends that the Territorial government consider gradually phasing in the minimum wage increase over several years so as to minimize the immediate damage of such a substantial increase all at once. CFIB also recommends the territorial government consider a first job/entry-level wage rate similar to the system in British Columbia (B.C.) whereby new employees are paid a lower than minimum wage rate for a prescribed period of time. In B.C., employees with no work experience can be paid $6.00 per hour for the first 500 hours of work. Once employees have accumulated 500 hours of paid work experience with one or more employers they are entitled to receive the regular B.C. minimum wage, which is $8.00 per hour. This system allows an employer to pay a little less during a period when their training costs are higher and the employee tends to function at lower productivity. A similar approach is also used in Nova Scotia. Finally, CFIB urges the territorial government to make it mandatory for consultations to take place with the NWT business community whenever an issue that impacts business is being considered, especially issues related to minimum wage or other labour standards. CFIB is always available to provide such input on behalf of our members, and we will do whatever we can to encourage our members to participate in such consultations. As minimum wage and labour standards are issues of significant importance to the small business sector in the NWT we urge you to reconsider your decision and adopt the recommendations above. I look forward to your response. Should you have any questions, please contact me at any time. Sincerely,
Corinne Pohlmann Director, Alberta/NWT c.c. All government MLAs