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What you need to know about COVID-19: August 11, 2020
A framework for minimum-wage increases was communicated over two years ago by then Advanced Education, Skills and Labour Minister Al Hawkins. Hawkins made the announcement in 2018 that annual minimum-wage increases would now be tied to the Consumer Price Index (CPI), establishing a level of predictability moving forward.
Hawkins stated, “It’s important for us as a government to strike a balance between the employer and the employee. We feel right now, at this point in time, that having inflation attached to a predictable increase in minimum wage is the way to go.”
The business community largely applauded this move by Newfoundland and Labrador’s provincial government. After years of the minimum wage being determined by seemingly arbitrary factors and timing, there would now be a level of fairness and predictability for both the employer and the employee. This past year the Government of Newfoundland and Labrador completed a minimum-wage review required by legislation.
During that review, the Independent Chair of the committee noted in the final report that “There has to be predictability to help the employee and the employer know what the rate of pay will be over the next number of years. With that said, government should consider leaving minimum wage at its current rate for April 1st, 2020, tied to the CPI index.” He further added that “whatever the decision on minimum wage might be, it should be tied to facts and the economic indicators and not emotion and speculation.”
This past year the Government of Newfoundland and Labrador completed a minimum-wage review required by legislation.
Government did not heed the advice of the committee chair or the stakeholders that requested that guidelines be followed for setting the minimum wage. Instead, they reversed their previous decision and ordered four increases of the minimum wage between April 2020 and October 2021.
These increases were put forth despite overwhelming evidence that minimum-wage increases do not have an overall benefit to the economy and disproportionately hurt those that minimum-wage increases are intended to help by reducing employment growth and raising prices. Newfoundland and Labrador’s Department of Finance completed an analysis on an increase to a $15-an-hour minimum wage and the findings indicated that teen employment would be negatively affected, seniors living on fixed income would have their purchasing power eroded, and that the 80 per cent of people living in poverty would be negatively impacted by higher cost of living estimates. This information can be found in the Minimum Wage Review Committee’s report online (https://www.gov.nl.ca/aesl/files/2020-Mimium-Wage-Review-Committee-Report.pdf)
A lasting solution to eliminating poverty and assisting minimum-wage earners is complex, and substantial increases to the minimum wage are not the answer. In 2013, the Ontario government struck a panel to investigate the economic impact of increasing the minimum wage and found that the “link between poverty and low wages is weak.” The panel also noted that “some studies even find that a higher minimum wage leads to an increase in poverty.” The panel cited a study where a 10 per cent increase in the minimum wage was linked with a four to six per cent increase in Canadian families living in relative poverty over a 20-year span.
The next premier of Newfoundland and Labrador should carefully consider the minimum-wage review report, especially the analysis from the non-partisan public servants that completed the analysis in the Department of Finance.
It’s time to apply predictability and reason to government decisions that affect the economy and remove the current arbitrary decision making applied to minimum wage increases.
Brandon Ellis, senior manager of policy
Atlantic Chamber of Commerce