Are two increases to minimum wage the best solution?

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Critics suggest raising income tax exemption, indexing for inflation, better options for poor

The most vocal critics of raising the minimum wage are often those who don’t have to deal with the tight economic realities of trying to make ends meet on $10 an hour. Minimum wage earners are generally happy for any increase and while the two planned raises are steps in the right direction, are never enough. The government announced Friday the minimum wage will increase to $10.20 an hour June 1 and to $10.35 in October.

Business is upset for two reasons — the added costs and the short notice. Labour Minister Janice Sherry says the new rates reflect a stronger and more buoyant economy. Hmm. She couldn’t have paid close attention to the budget brought down Tuesday. 

The fact remains the current rate hasn’t changed in two years. Both Opposition and business are quick to suggest that raising the minimum wage is not the best way to help P.E.I.’s low income earners. They argue that raising the basic income tax exemption, or at least indexing it to inflation, would make more sense and make it fairer for all parties involved.

The Canadian Federation of Independent Business argues, correctly, that P.E.I.’s failure to index its personal income tax systems to adjust for inflation results in bracket creep. That hidden tax jumps every year as incomes grow and more income becomes taxable or taxable at higher rates. But most examples of CFIB’s charts and figures start at a $40,000 threshold. The CFIB is more concerned with middle-class or higher income brackets where their client base is located. A minimum wage earner’s total income would be under $20,000 and he or she can’t relate to those stratospheric numbers.

The CFIB does suggest that because of bracket creep, from 2002 to 2014 a minimum wage earner on P.E.I. is paying $1,246 more in taxes today than 10 years ago. That is a lot of money. Perhaps an accountant or economist could work out the exact figures of what indexation means for lower-income Islanders, and compare that to increasing the minimum wage and see which figure better helps the poor.

It might be an easier sell if we saw the impact on those making $10 an hour, $375 a week, $19,500 a year — before deductions. Maybe then low wage earners might buy into the indexing idea. Government is reluctant to change the personal tax exemption because it will lose money. It keeps claiming there are more effective ways to put money into the pockets of low-income earners but we’re still waiting on that one. Any initiatives to address the problem were absent from Tuesday’s budget or Friday’s announcement.

Critics say raising the minimum wage just puts more money into government coffers because of additional payroll and other taxes so that the biggest winner Friday will be government itself.

The NDP is more concerned with raising the minimum wage to $10.30 right now and increase it steadily, as the groundwork towards a Basic Income Guarantee (BIG). The Green Party is also advocating for some form of Guaranteed Livable Income, a utopian plank in the federal party platform since the 1990s. Leader Peter Bevan-Baker has talked about it numerous times in the nine elections in which he has run as a candidate on P.E.I.

There is a general feeling that raising the minimum wage just means that business will increase its prices or lay off workers to deal with increased costs, and government will reach in with extra taxes to gobble up what’s left, so nothing will really change for anyone in the long run.

Once things settle out, will it be the status quo all over again?

Organizations: Canadian Federation of Independent Business, NDP, The Green Party

Geographic location: P.E.I.

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Recent comments

  • Brian
    April 14, 2014 - 13:08

    Let the politicians start paying more in taxes and see if they like it. I doubt if they would. They would rather have the working person pay it al. So they get richer and we get poorer

    • huh
      April 14, 2014 - 16:28

      your point assumes that if you are a politician, you must surely be rich and never have worked for minimum wage. Pretty big stretch IMO.